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Myanmar forgiven $6 billion in debt, clearing way for aid

Nations free Myanmar of $6 billion in debt, lifting what one official called a "very distressful burden."

Myanmar reforms 2012 9 26Enlarge
A monk and his son feed seagulls at a jetty along the Yangon river ahead of the parliamentary elections on March 29, 2012 in Yangon, Myanmar. (Paula Bronstein/AFP/Getty Images)

BANGKOK, Thailand — Myanmar, heralded by many investors as Asia's final economic frontier, has received a major break from a coalition of wealthy lending nations.

They've agreed to wipe out half of the troubled nation's foreign debt, a sum totaling $6 billion, reported Reuters, marking a key step for the country's new reformist government to secure outside aid. 

The informally-named Paris Club, a group representing 19 major world economies, has forgiven $6 billion of the country's debt, said Al Jazeera.

The debt clearance paves the way for aid organizations and donors to directly contribute to Myanmar's economic recovery after years of Western-led sanctions.

But this move amounts to more than a generous boost to Myanmar's emerging economy, reports GlobalPost senior correspondent in Southeast Asia, Patrick Winn.

"It's a vote of confidence," Winn says.

Myanmar, formerly titled Burma, fell out of favor with investors when it stopped paying off many of its debts in 1987. A year later, the military-dominated nation was well on its way to achieving global pariah status when troops gunned down pro-democracy protesters.

Winn's take:

The Paris Club appears convinced that the nation won't ignore debt or kill protesters again. (A war against a mountain-dwelling ethnic group's guerrilla forces along the Chinese border, however, is escalating.)

Myanmar's leaders welcome the move.

Myanmar's finance minister, Win Sein, told state media that it "heralded the beginning of an era of new relationships."

Myanmar official and presidential advisor Zaw Oo told Reuters this lifts a "very distressful burden."

On top of the debt clearance, Myanmar is also now eligible for World Bank and Asian Development Bank loans likely aimed at repairing its shoddy ports and power grids, said Reuters

In past years, Myanmar's government has dribbled crumbs toward infrastructure. This has only entrenched poverty by scaring both local and foreign investors away, GlobalPost's Winn said.

But, as a senior Asian Development Bank economist told the Wall Street Journal on Monday, "you always have to give a low-income country another chance."

Myanmar owed some $900 million to the World Bank and the ADB, according to Al Jazeera.

Reuters said that after a crucial loan from Japan, ADB quickly responded by offering a $512 million package earmarked for development, while the World Bank offered $440 million in credit. 

World Bank Myanmar director Annette Dixon told Al Jazeera the country "has come a long way in its economic transformation, undertaking unprecedented reforms to improve people's lives, especially the poor and vulnerable."

Myanmar's president last year oversaw historic political and economic reforms in the former junta-led country, prompting outside nations to lift economic restrictions. 

The Paris Club deal was secured on Jan. 25, according to the Press Trust of India, citing a Myanmar statement that also said Norway is set to forgive $534 million of the country's debt — with more nation's soon to follow, officials hope. 

“Other bilateral donors are expected to follow suit and more debt cancelation is coming on the way in the next six months,” PTI quoted the state's statement as saying. 

Myanmar is one of the region's poorest nations. 

Patrick Winn contributed to this report form Bangkok.

http://www.globalpost.com/dispatch/news/regions/asia-pacific/myanmar/130128/myanmar-forgiven-6-billion-debt-clearing-way-aid