Myanmar: Kachin violence continues, government clears debts

Updated On: Feb 01, 2013

Clashes in the Northern Kachin State of Myanmar have continued after the army seemed to ignore the president’s ceasefire declaration on January 19th.

Myanmar also cleared its arrears to the World Bank and the Asian Development Bank (ADB) with the help of a loan from Japan, allowing for the resumption of international aid. Other bilateral donors are expected to cancel arrears owed by the country, opening the door for increased lending.

Report: Talking peace, waging war, (The Economist, 2 February 2013)

Report: Myanmar Clears ADB, World Bank Overdue Debt With Japan Help, (Bloomberg, 28 January 2013)

An unpredictable conflict

The changes come as Myanmar renewed its offensive against Kachin rebels in the North of the country, closing in on Laiza, the Kachin Independence Army's administrative headquarters.

Observers warn that a prolonged conflict between the military and the KIA could push thousands of refugees across the border into China, upsetting Myanmar's most economic and diplomatic relationship.

Despite this, it is possible that the government is looking to gain a stronghold on the state, which has long been subject to guerrilla warfare. Having received guarantees of investment and diplomatic support from Western powers, Myanmar's government may feel confident that ethnic tensions will not jeapordise their engagement.

Debt cancellation

Fighting continued as the government announced it had struck a deal with international lenders to cancel almost $6bn of its debt.

"The authorities recognise that a successful arrears resolution is essential for Myanmar to re-engage with the international community and ensure debt sustainability," the IMF said in a report this month. Myanmar's finance minister Win Shein  said that the country would use the resources made available by the debt relief for development and poverty reduction programmes.

The ADB said Monday that it planned "major investments" in road, energy, irrigation and education projects, remarking that its return to Myanmar was a "historic tipping point".

The ADB announced a $512 million loan, its first to Myanmar in more than 30 years, while the World Bank separately said it would lend $440 million. The World Bank grant will go to local communities for roads, bridges, irrigation systems, schools, health clinics or rural markets, according to the organisation.

Although business id showing great interest in the country, the government realises that it needs capital investment to modernise the country's financial and physical infrastructure after years of neglect.