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MYANMAR FISCAL MONITORING P. 2 Contents 1 2 Preface & Acknowledgments.................................................... 5 Executive summary.................................................................... 6 Public finance Service delivery 18 trends 9 1.1 AGGREGATE FISCAL 2.1 HEALTH SECTOR 18 ENVIRONMENT 9 2.2 EDUCATION SECTOR 21 1.2 REVENUE 11 2.3 SOCIAL PROTECTION 1.3 EXPENDITURE 13 SECTOR 24 MYANMAR FISCAL MONITORING P. 3 Figures FIGURE 1 REVENUE, EXPENDITURE AND FISCAL BALANCE % OF GDP 10 FIGURE 2 QUARTERLY SECURITIES AUCTION OF T-BONDS MMK, BILLIONS 10 FIGURE 3 REVENUE OUTTURN MMK, BILLIONS AND % OF BUDGET (RHS); 2015/16-2022/23 11 FIGURE 4 REVENUE BREAKDOWN % OF GDP 11 FIGURE 5 TAX COLLECTION % OF GDP, COLLECTION BY IRD AND CUSTOMS ; MILLION MMK, THREE LARGEST TAXES COLLECTED BY IRD 12 FIGURE 6 EXPENDITURE % OF GDP 13 FIGURE 7 EXPENDITURE BY CATEGORY % OF TOTAL 13 FIGURE 8 BUDGET OUTTURNS MMK, BILLIONS AND % OF BUDGET (RHS); 2015/16-2022/23 14 FIGURE 9 EXPENDITURE BY CATEGORY % OF TOTAL SPENDING; % GDP 15 FIGURE 10 PENSION COST MMK BILLIONS; 2015/16-2021/22 16 FIGURE 11 NUMBER OF PENSIONERS 2015/16-2021/22 16 FIGURE 12 SUBNATIONAL SPENDING BY STATE AND REGION GOVERNMENTS SUBNATIONAL SPENDING INDEX (STANDARDIZED TO 100 IN 2020) 17 FIGURE 13 MOH ACTUAL SPENDING MMK BILLION AND SHARE OF TOTAL SPENDING BY AUTHORITIES (%) 19 FIGURE 14 MOH EXECUTION PROVISIONAL OR TEMPORARY ACTUALS VERSUS BUDGET ESTIMATES (%) 19 FIGURE 15 HOUSEHOLD EXPERIENCES IN PRICE CHANGES FOR NCD MEDICINES (ROUND 3) 20 FIGURE 16 MOE ACTUAL SPENDING MMK BILLION AND SHARE OF TOTAL SPENDING BY AUTHORITIES (%) 21 FIGURE 17 MOE EXECUTION PROVISIONAL OR TEMPORARY ACTUALS VERSUS BUDGET ESTIMATES (%) 21 FIGURE 18 SHARES OF DIFFERENT TYPES OF HOUSEHOLDS’ MONTHLY EDUCATIONAL EXPENDITURES, 2017–2023 22 FIGURE 19 SHARE OF HOUSEHOLDS BY TYPE OF SCHOOL WHERE THE CHILDREN ARE ENROLLED 23 FIGURE 20 MEDIAN HOUSEHOLD EDUCATIONAL EXPENDITURE (PER STUDENT) BY HOUSEHOLD TYPE 23 FIGURE 21 MOSWRR’S OVERALL BUDGET EXECUTION MMK BILLION AND SHARE OF TOTAL SPENDING BY AUTHORITIES (%) 24 FIGURE 22 MOSWRR BUDGET EXECUTION PROVISIONAL OR TEMPORARY ACTUALS VERSUS BUDGET ESTIMATES (%) 24 MYANMAR FISCAL MONITORING P. 4 Acronyms BE BUDGET ESTIMATE CBM CENTRAL BANK OF MYANMAR CIT CORPORATE INCOME TAX FY FISCAL YEAR GDP GROSS DOMESTIC PRODUCT IRD INTERNAL REVENUE DEPARTMENT MCCT MATERNAL AND CHILD CASH TRANSFER MMK MYANMAR KYAT MOE MINISTRY OF EDUCATION MOHS MINISTRY OF HEALTH AND SPORTS MOPF MINISTRY OF PLANNING AND FINANCE MSWRR MINISTRY OF SOCIAL WELFARE, RELIEF AND RESETTLEMENT RE REVISED ESTIMATE SEE STATE ECONOMIC ENTERPRISE TA TEMPORARY ACTUAL USD UNITED STATES DOLLAR WB WORLD BANK MYANMAR FISCAL MONITORING P. 5 Preface & Acknowledgments T his Budget Brief presents a summary of developments in Myan- mar’s public finances. This report includes three sections that cover the aggregate fiscal update, public finance developments in states and regions, and core service ministries. The report relies on data from published reports of the Ministry of Planning and Finance, and other publicly available information.1 Where news reports are referenced, additional efforts were made during the monitoring pro- cess to triangulate reports from several reputed news media sources to ensure the veracity of the information presented. The Myanmar Budget Brief was prepared by a team led by Ildrim Valley (Public Sector Specialist), Pike Pike Aye (Public Sector Management Specialist), and in- cluded Kemoh Mansaray (Senior Economist), Saw Thu Nandar (Consultant), Aung Phyo Kyaw (Consultant), Theingie Han (Consultant), and May Oo Mon (Program Assistant). The report was undertaken under the guidance of Mariam J. Sherman (Country Director for Myanmar, Cambodia, and Lao PDR), Ulrich Schmitt (Operations Man- ager), Kim Alan Edwards (Program Leader for EAP Equitable Growth, Finance and Institutions Practice Group), Alma Kanani (Practice Manager, Governance), Paul Jacob Robyn (Team Lead/Senior Health Specialist), Tsuyoshi Fukao (Senior Education Specialist), Mar Mar Thwin (Education Specialist) and Yashodhan Ghorpade (Senior Economist). To receive email alerts for upcoming World Bank Myanmar monitoring products, please contact MyanmarMonitoring@worldbank.org For information about the World Bank and its activities in Myanmar, please visit https://www.worldbank.org/en/country/myanmar 1 This brief builds on the June 2023 Myanmar Budget Brief by incorporating publicly available information. This primarily encompasses data from the recently published quarterly budget reports for the third and fourth quarters (October 2022 to March 2023), fourth quarter Statistics Bulletin, 2023/24 Citizen’s Budget, Central Bank Quarterly Financial Statistics Bulleting, and Fiscal Policy Statement. The release of published documents comes with significant delays compared to the preceding six months. The third-quarter report was published in mid-July 2023, nearly seven months after the account closing date of December 2022, while the fourth-quarter report was released within six months from the end of the quarter. Other budget documents include the 12-month interim Budget Law, 12-month National Planning Law, and 12-month Citizen’s Budget for October 2022 to March 2023, quarterly reports covering 2021/22, first and second quarters reports covering 2022/23. The availability of these data is a result of the continued practice of some of the fiscal transparency measures developed as part of the past public financial management (PFM) reforms. However, access to disaggregated is limited. MYANMAR FISCAL MONITORING P. 6 Executive summary 1 In the year ended Revenues and spending were higher than bud- get estimates, however, both are lower than in March 2023 (2022/23), 2019/20 as a share of GDP. Spending exceeded the the fiscal deficit is budget by about 6 percent after two fiscal periods estimated at 6.4 of under-execution relative to the budget. This percent of GDP. most likely reflects higher costs of delivering on the budget because of high inflation. 2 The sale of Treasury The volume of T-bonds sold rose to MMK 858 bil- lion during the last quarter of 2022/23, the largest Bonds has picked up quarterly amount since December 2020. The aver- but remains below age quarterly sales volume for 2022/23 remains be- 2021 levels. low the levels observed before 2021. This suggests continued reliance on the use of financing by the Central Bank of Myanmar (CBM). MYANMAR FISCAL MONITORING P. 7 3 In 2022/23, revenue This was primarily driven by a higher-than-bud- geted collection of non-tax revenues in nominal collection surpassed terms. However, high inflation has meant that the budgeted target despite nominal increases, non-tax collection in by 6 percent but 2022/23 is still below the 2021 levels by 1 percent- declined in real age point as a share of GDP and declined in real terms by 3.4 percent compared to collection from terms. the previous 12 months (April 2021- March 2022). 4 In 2022/23, tax revenue Collection in 2022/23 is estimated to exceed the budget target by 4.5 percent, according to from major sources revised estimates published by the authorities. is estimated at 5.1 Owing to high inflation, collection from ma- percent of GDP, lower jor sources is lower than in 2019/20 as a share than in 2019/20. of GDP. Specifically, revenue from the three primary taxes remains well below the levels observed between 2018 and 2020 as a share of GDP and in nominal terms. 5 Total spending Spending stood at 26.2 percent of GDP in 2022/23, a de- cline from the 2018-2020 average of 27.2 percent. While remained at a spending increased modestly in nominal terms in recent relatively low years, it failed to keep pace with the high inflation level in 2022/23. that occurred in 2022/23. In real (constant kyat) terms, government spending declined by 14 percent between 2019/20 and 2022/23. MYANMAR FISCAL MONITORING P. 8 6 Total subnational spending The decreases are more pronounced in Chin State, Kayah State, and Mandalay decreased from 2.9 to 2.3 Region which collectively account for percent of GDP between nearly half of the decline in subnational 2019/20 and 2022/23. spending. 7 Spending on services Spending on health and education declined from the already relatively low levels of 3.8 percent of remained low in GDP in 2019/20 to around 2 percent in 2022/23. Im- 2022/23. proved spending execution in the education sec- tor can be attributed to the reopening of schools, colleges, and universities in areas unaffected by unrest. Spending challenges in the health sector reflect broader fiscal challenges and potential changes in health financing in the public sector, project delays, financial limitations, and insuffi- cient workforce to complete planned activities. 8 State Economic Enterprises Despite significant cuts to spending by SEEs, they still make the bulk of public (SEEs) continue to account spending. In 2022/23, they accounted for the largest share of public for about 35 percent of spending or 9.3 spending, but this share is percent of GDP. declining. MYANMAR FISCAL MONITORING P. 9 1 Public finance trends 1.1 Aggregate Fiscal Environment T he fiscal deficit was elevated at 6.4 percent of GDP in 2022/23 (Figure 1). The revised estimates for the fiscal year published by the authorities suggest that the fiscal deficit widened by around 8 percent in nominal terms. This is largely driven by higher expected spending, increasing by 6.4 percent in nominal terms relative to what was in the budget. The fiscal deficit is expected to remain elevated at 5.7 percent of GDP in 2023/24 based on the approved budget and the GDP projected by the authorities.2 2 Starting in April 2022, The sale of Treasury Bonds has picked up but remains below the Myanmar’s budget calendar has changed from October–September 2021 levels. The volume of T-bonds sold rose to MMK 858 billion to April–March. To accompany the change, a 6-month interim during the last quarter of 2022/23, marking the largest quarterly budget was introduced to bridge the end of 2020/21 fiscal year on amount since December 2020. The average quarterly sales volume September 30, 2021. for 2022/23 remains below the levels observed before 2021 (Figure 2). This suggests continued reliance on the use of financing by the MYANMAR FISCAL MONITORING P. 1 0 FIGURE 1 REVENUE, EXPENDITURE AND FISCAL BALANCE % OF GDP REVENUE, % OF GDP EXPENDITURE, % OF GDP 30% 9% 20% 6% 10% 3% 0% 0% DEFICIT, -10% -3.1% % OF GDP -3% (RHS) -6.2% -20% -2.2% -6% -5.7% -30% -7.6% -6.4% -9% 2018/19 TA 2019/20 PA 2020/21 PA 2021/22 2022/23 RE 2023/24 BE (PA; 6 M.) OCT. ‘21 – MAR. ‘22 Note: Differences in Source: MOPF - Central Bank of Myanmar (CBM). The available financing debt historical aggregates from https://www.mopf. the previous budget brief gov.mm/; WB staff data for the period leading up to this report continues to be lim- stem from updates in estimates. fiscal estimates published ited. According to the recently published 2023/24 Citizen’s budget by the authorities. Estimates for 2021/22 and Fiscal Policy statement, the domestic debt to GDP percentage (6-month period) are calculated based on has increased significantly from 27 percent in 2019/20 to 41 per- economic output for the cent in 2022/23 (up to December 2022). In nominal terms, the total two quarters between October 2021 and March debt was MMK 67.6 billion, of which the external debt amounted 2022. The figure for 2023/24 is based on to MMK 22.3 billion in 2022/23. This rise is primarily attributed to GDP published by the authorities three methods of budget deficit financing: selling treasury bonds PA = Provisional Actual, and bills and borrowing from the Central Bank. TA = Temporary Actual, BE = Budget Estimate, RE = Revised Estimate. FIGURE 2 QUARTERLY SECURITIES AUCTION OF T-BONDS MMK, BILLIONS 1,600 1,400 1,200 AVERAGE 1,000 QUARTERLY SALES IN A GIVEN FY 800 600 400 QUARTERLY SALES 200 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 2018/19 2019/20 2020/21 2020/21 2022/23 OCT - SEPT OCT - SEPT OCT - SEPT OCT - MAR APR - MAR Source: Central Statistical Organization (CSO); WB staff estimates. MYANMAR FISCAL MONITORING P. 11 1.2 Revenue R evenue collection exceeded budget targets. Figure 3 compares actual revenue collection relative to the budgeted amounts. In 2022/23, revenue collection surpassed the budgeted target by 6 percent. This was primarily driven by higher expected nominal collection in non-tax revenue as per the revised estimate published by the authorities. However, high inflation has meant that despite nom- inal increases, non-tax collection in 2022/23 is still below the 2021 levels by 1 percentage point as a share of GDP and declined in real terms by 3.4 percent compared to collection from the previous 12 months (April 2021- March 2022).3 Non-tax collection continues 3 Real values derived using to account for over two-thirds of total revenue, the majority of GDP deflator published by the authorities with 2015 as the base which ( just under 70 percent) is derived from State Economic year. Enterprises (SEEs), particularly revenue from exports of gas. FIGURE 3 REVENUE OUTTURN FIGURE 4 REVENUE BREAKDOWN MMK, BILLIONS AND % OF BUDGET (RHS); % OF GDP 2015/16-2022/23 BUDGET ESTIMATE ACTUAL/TA OUTTURN AS A % OF TAX NON-TAX FY BUDGET (RHS) 30,000 140% 25% 120% 25,000 107% 120% 106% 20% 98% 100% 100% 99% 100% 20,000 80% 15% 64% 15,000 60% 10% 10,000 40% 5,000 5% 20% 0 0% 0% 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 2019/20 2020/21 2021/22 2022/23 PA PA PA TA PA PA PA (6m.) RE PA PA PA RE PA = Provisional Actual, Source: MOPF - TA = Temporary Actual, https://www.mopf. BE = Budget Estimate, gov.mm/; WB staff RE = Revised Estimate. estimates. Estimates for 2021/22 (6-month period) are calculated based on economic output for the two quarters between October 2021 and March 2022 MYANMAR FISCAL MONITORING P. 1 2 In 2022/23, tax collection from major sources is estimated at 5.1 percent of GDP (Figure 5). Collection in 2022/23 by the Internal Revenue Department (IRD) and Customs is estimated to exceed the nominal budget target by around 4.5 percent, according to revised estimates published by the authorities. Owing to high inflation, despite higher nominal tax collection since 2020/21, tax receipts from major sources are lower than in 2019/20 as a share of GDP (Figure 5.). Specifically, revenue from the three primary taxes remains well below the levels observed in 2019/20 as a share of GDP and in nominal terms. In 2023/24, the budget sets a reve- nue target of 5.1 percent of GDP reported by the authorities. FIGURE 5 TAX COLLECTION % OF GDP, COLLECTION BY IRD AND CUSTOMS MILLION MMK, THREE LARGEST TAXES COLLECTED BY IRD INCOME TAX COMMERCIAL TAX SPECIFIC GOODS TAX INCOME TAX COMMERCIAL TAX OTHER TAXES CUSTOMS DUTIES SPECIFIC GOODS TAX 7% 6.6% 2023/24 3,001 2,303 1,138 BE 6% 1.1% 5.1% 5.1% 2022/23 5% 2,438 1,910 1,535 4.5% RE 4.1% 1.2% 0.8% 4% 1.9% 0.7% 2021/22 2,699 1,873 1,148 0.8% PA* 3% 1.7% 1.6% 1.5% 1.2% 2020/21 1,990 1,686 767 2% PA 3.0% 2.2% 1% 1.8% 1.8% 1.9% 2019/20 3,379 2,110 1,267 PA 0% 2019/20 2020/21 2021/22 2022/23 2023/24 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 PA PA PA RE BE Note: PA = Provisional Actual, BE = Budget Source: MOPF - Estimate, RE = Revised Estimate. 2023/24 https://www.mopf. estimates are based on the BE approved in the gov.mm/; WB staff budget and the GDP reported by the authorities. estimates. Taxes only include those collected by the IRD and Customs. Taxes levied on the utility of State- owned properties are not included. Left side figure: Estimates for 2021/22 (6-month period) are calculated based on economic output for the two quarters between October 2021 and March 2022 Right side figure: * annualized nominal revenue collection for ease of comparison, which assumes a doubling of revenue collected during the 6-month period between October 2021 and March 2022. MYANMAR FISCAL MONITORING P. 1 3 1.3 Expenditure T otal spending remained at a relatively low level in 2022/23. Spending stood at 26.2 percent of GDP in 2022/23, a decline from the 2018-2020 average (of 27.2 percent) (Figure 6). While spending increased modestly in nominal terms in recent years and is around the levels of the 2019/20 fiscal year, it failed to keep pace with the high inflation that occurred in 2022/23. In real (constant kyat) terms, government spending declined by 14 percent between 2019/20 and 2022/23. Capital spending has declined as a share of GDP as well as a share of the total spending (Figure 7). Looking ahead to 2023/24, the budget approved by the authorities signals a further cut in planned spending, to 24 percent of GDP. FIGURE 6 EXPENDITURE FIGURE 7 EXPENDITURE BY CATEGORY % OF GDP % OF TOTAL CURRENT CAPITAL FINANCIAL 30% 100% 4% 6% 3% 4% 5% 6% 25% 22% 20% 21% 19% 25% 80% 28% 20% 60% 15% 40% 71% 74% 76% 74% 75% 57% 10% 20% 5% 0% 0% 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 2018/19 2019/20 2020/21 2021/22 2022/23 2023/24 TA PA PA (PA, 6m) RE BE TA TA TA TA (6m) TA BE Oct 21 - Mar 22 Note: Differences in historical aggregates from Source: MOPF - the previous budget brief stem from updates https://www.mopf. in fiscal estimates published by the authorities. gov.mm/; Citizen’s Estimates for 2021/22 (6-month period) are Budgets; WB Staff calculated based on economic output for the estimates two quarters between October 2021 and March 2022. The figure for 2023/24 is based on GDP published by the authorities. PA = Provisional Actual, TA = Temporary Actual, BE = Budget Estimate, RE = Revised Estimate. MYANMAR FISCAL MONITORING P. 14 Execution of the budget continues to increase. In 2022/23, spending exceeded the budget by 6.4 percent (Figure 8). This marks an improvement from the sharp decline in 2020/21 when over 20 percent of the budget was not spent. A higher execution rate doesn’t reflect improved performance management. Rather, this is most likely the result of higher costs of delivering on the budget because of high inflation. FIGURE 8 BUDGET OUTTURNS MMK, BILLIONS AND % OF BUDGET (RHS); 2015/16-2022/23 BUDGET ESTIMATE ACTUAL/TA OUTTURN AS A % OF FY BUDGET (RHS) 40,000 120% 106% 95% 101% 93% 98% 96% 100% 30,000 75% 86% 80% 20,000 60% 40% 10,000 20% - 0% 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23 PA PA PA TA PA PA PA(6 m) RE Note: Actual/TA = actual Source: MOPF - Overall spending on services remained low in 2022/23. Spend- outturns or temporary https://www.mopf. estimates. gov.mm/; Citizen’s ing on health and education declined from the already relatively Budgets; WB Staff estimates low levels of 3.8 percent of GDP in 2019/20 to around 2 percent in 2022/23. As a share of the budget, this translates to a decline from 10.7 percent of total budgeted spending to less than 8 per- cent during the same period. This, however, masks an increase in education spending as a share of the budget. As a share of budget, spending on education is more than twice as large as spending on health. In the 2023/24 budget, the authorities expect spend- ing on health and education to increase to 2.2 percent of GDP or 9.1 percent of the budget (Figure 9), primarily driven by higher spending on health. If realized, this would mark a small reversal after multiple years of declines in spending on health. SEEs continue to account for the largest but declining share of public spending. Despite significant cuts to spending by SEEs, they still make the bulk of public spending. In 2022/23, they ac- counted for about 35 percent of spending or 9.3 percent of GDP (Figure 9). This is budgeted to decrease to 8.7 percent of GDP in 2023/24. It is difficult to identify the source of this decline without MYANMAR FISCAL MONITORING P. 1 5 more detailed data. However, reduced spending on operations and maintenance, particularly in the energy sector, could at least partially explain the declining trend. Spending on defense continues to increase. In 2022/23, it ac- counted for 12 percent of total spending. In the 2023/24 budget, the authorities expect it to increase to 17 percent of the overall budget or 4.1 percent of GDP. In nominal terms, this would rep- resent over a 40 percent increase, from MMK 3.7 trillion spent in 2022/23 to MMK 5.6 trillion planned in 2023/24, despite decreases in all other categories of spending (aside from a modest increase in health). FIGURE 9 EXPENDITURE BY CATEGORY % OF TOTAL SPENDING % GDP SEES OTHER DEFENSE SEES OTHER DEFENSE EDUCATION HEALTH MOPF EDUCATION HEALTH MOPF 100% 12% 11.2% 13% 90% 25% 28% 23% 20% 2.5% 10% 9.3% 80% 1.7% 6.6% 8.7% 2.1% 6.2% 3.3% 2.7% 5.6% 70% 7.4% 17.0% 8% 7.2% 7.6% 7.4% 8.0% 10.2%i 12.2% 60% 10.4% i 6.6% 6.3% 13.1% 5.9% 50% 24% 25% 6% 5.4% 14% 23% 4.7% 40% 15% 4.1% 4.1% 4% 3.6% 4.6% 30% 3.0% 3.2% 3.1% 3.1% 39% 36% 35% 36% 2.1% 2.1% 20% 33% 1.9% 2% 1.6% 1.6% 0.9% 1.1% 10% 0.6% 0.6% 0.4% 0.4% 0% 0% 2019/20 2020/21 2021/22 2022/23 2023/24 2019/20 2020/21 2021/22 2022/23 2023/24 (TA) (TA) (TA 6m) (TA) (BE) (TA) (TA) (TA 6m) (TA) (BE) Note: Provisional actuals Source: MOPF - are not available at the https://www.mopf. level of sector/ministry gov.mm/; Citizen’s spending. Temporary Budgets; WB Staff actuals are reported estimates instead. Estimates for 2021/22 (6-month period) are calculated based on economic output for the two quarters between October 2021 and March 2022 and thus are not directly comparable to annual figures. The figure for 2023/24 is based on the GDP published by the authorities. PA = Provisional Actual, TA = Temporary Actual, BE = Budget Estimate, RE = Revised Estimate. MYANMAR FISCAL MONITORING P. 16 The rapid growth in pension costs over the five years to 2019/20 has reversed, despite continued growth in the number of pen- sioners. Pension costs doubled in nominal terms between 2015/16 and 2019/20, driven by a 27 percent increase in the number of pen- sioners as well as in pension benefits (Figure 10 and Figure 11). However, pension costs have since declined slightly in nominal terms. Myanmar’s pension coverage is low compared to countries with similar income levels. Currently, only civil servants, military and political personnel, and employees of SEEs are covered by the old-age pension system. Despite an increasing number of pensioners (about 40,000 added annually on average), nominal costs have remained stable at around MMK 1.1-1.2 trillion. Pen- sion costs are included under spending by MOPF in Figure 9. FIGURE 10 PENSION COST FIGURE 11 NUMBER OF PENSIONERS MMK BILLIONS; 2015/16-2021/22 2015/16-2021/22 2021/22* 2021/22* 2020/21 2020/21 2019/20 2019/20 2018/19 2018/19 2017/18 2017/18 2016/17 2016/17 2015/16 2015/16 0 500 1,000 1,500 0 200,000 400,000 600,000 800,000 1,000,000 Source: MOPF - https://www.mopf.gov.mm/; WB Total subnational spending decreased from 2.9 to 2.3 percent Staff estimates * 6 months annualized of GDP between 2019/20 and 2022/23. The decreases are more pronounced in some states/regions than in others. Chin State has experienced the largest decline in spending by over 40 percent since 2019/20, where the ability to deliver spending is impacted by active conflict in the area. Spending in Kayah State and Mandalay Region has declined by a quarter during the same period (Figure 12). Overall subnational spending decreased by 11 percent, from MMK 3.3 trillion to around MMK 2.9 trillion, between 2019/20 and 2022/23. Chin, Kayah, and Mandalay account for nearly half of the decline in subnational spending. Further declines of over 30 percent (down to MMK 2 trillion) are projected in the 2023/24 budget. MYANMAR FISCAL MONITORING P. 1 7 FIGURE 12 SUBNATIONAL SPENDING BY STATE AND REGION GOVERNMENTS SUBNATIONAL SPENDING INDEX (STANDARDIZED TO 100 IN 2020) KACHIN STATE KAYAH STATE KAYIN STATE CHIN STATE SAGAING REGION THANINTHARYI REGION BAGO REGION MAGWAY REGION MANDALAY REGION MON STATE RAKHINE STATE YANGON REGION SHAN STATE AYEYARWADDY REGION 120 110 100 90 80 70 60 50 2019/20 2020/21 2022/23 (TA) (TA) (TA) Source: MOPF - https://www.mopf.gov.mm/; WB Staff estimates MYANMAR FISCAL MONITORING P. 18 2 Service delivery 2.1 Health sector S pending on health by the Ministry of Health (MoH) continues to decline. As a share of total spending, MoH spending has declined to 1.7 per- cent, down from 2.1 percent a year earlier. In nomi- nal terms, this translates to about half of what was spent before 2021. In real (constant kyat) terms, MoH spending declined by nearly half since 2017/18. Looking ahead to 2023/24, the budget projects a 4.5 percent year-on-year decline of budgeted resources. This is, however, more than 40 percent higher than the actual spending in 2022/23 (Figure 14). MYANMAR FISCAL MONITORING P. 1 9 FIGURE 13 MOH ACTUAL SPENDING FIGURE 14 MOH EXECUTION MMK BILLION AND SHARE OF TOTAL PROVISIONAL OR TEMPORARY ACTUALS SPENDING BY AUTHORITIES (%) VERSUS BUDGET ESTIMATES (%) MOH SPENDING MOH SPENDING MOH BUDGETED SPENDING MOH SPENDING (% OF TOTAL, RHS) BUDGET EXECUTION RATE (%, RHS) 1,200 6% 1,600 120% 1,400 1,000 5% 100% 1,200 800 4% 80% 1,000 600 3% 800 60% 600 400 2% 40% 400 200 1% 20% 200 0 0% 0 0% 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22* 2022/23 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22* 2022/23 2023/24 Source: MOPF - https://www.mopf.gov.mm/; WB Budget execution in health continues to be low relative to the Staff estimates * Annualized spending/expenditure, which historical trend. Spending has declined relative to what has been assumes doubling of spending/expenditure during the 6-month period between October planned for in budgets. This is marked by fluctuations in budget- 2021 and March 2022. ary execution, reflecting broader fiscal challenges and potential changes in health financing in the public sector. Despite a slight increase, the average execution rate in both 2021/22 and 2022/23 remains around 65 percent, compared to 86 percent in 2018/19. This is despite large reductions in the health budget since 2021. Such consistent underutilization and reduction in budgets, particularly in essential public health areas has a severe adverse impact on health outcomes of households and underscores the importance of re-evaluating current resource allocation and re-examining health priorities. The Ministry of Health’s capital budget execution rates declined from 87 percent in 2016/17 to around 62-69 percent in 2021/22 and 2022/23. This indicates potential project delays, financial limitations, insufficient workforce to complete planned activi- ties, or a shift in capital spending priorities. The citizens’ budget issues by the authorities for 2021/22 and 2022/23 states that a sub- stantial part of the capital budget is earmarked for infrastructure, such as clinics and staff housing. Meanwhile, budget execution of recurrent spending was close to 100 percent in 2019/20, likely attributable to COVID-19 measures, but dropped significantly to 52 percent in 2020/21 and modestly recovered to around 63 in subsequent years. A significant share of the current budget was allocated for medicine procurement and associated costs. MYANMAR FISCAL MONITORING P. 2 0 Reduced public spending on health is likely contributing to worsening outcomes, possibly including the availability and affordability of certain types of medicine. A recent World Bank and WHO study highlighted the critical need to tackle escalating medicine prices and guarantee affordability and accessibility for individuals with chronic health conditions. 84.1 percent of respondents with chronic conditions have reported forgoing or reducing their medication due to increased costs (Figure 15). To alleviate financial burdens, many healthcare providers have shift- ed to prescribing more affordable brands. Yet, these adaptations fall short of offsetting the negative impacts of surging drug prices. FIGURE 15 HOUSEHOLD EXPERIENCES IN PRICE CHANGES FOR NCD MEDICINES (ROUND 3) DIABETES MEDICATIONS (N=380) HYPERTENSION MEDICATIONS (N=458) 100% 79% 79% 80% 80% INCREASING DRUG EXPENSES MEDICATION COST TRENDS FOR 66% 65% FOR DIABETIC AND DIABETES AND HYPERTENSION 60% HYPERTENSIVE PATIENTS 60% 40% 40% 20% 19% 20% 10% 12% 10% 20% 12% 14% 8% 1% 1% 3% 2% 0% 0% INCREASE DECREASE UNCHANGED DON’T CONSIDERABLY MODERATEL SLIGHTLY DON’T KNOW KNOW (>20% (~20% (~10% INCREASE) INCREASE) INCREASE) Source: World Bank and World Health Changes in Medication Costs for Diabetes and Hypertension Organization’s survey on Measuring Access to Health Services Phone Surveys, 2023. Patients. Figure 15 depicts a troubling rise in medication costs for diabetes and hypertension patients, with an alarming 79 percent from both groups noting increased expenses. Specifically, 66 per- cent of diabetes patients and 65 percent of hypertension patients reported cost hikes of over 20 percent. This trend offers a window for healthcare stakeholders to collaboratively devise solutions to these rising costs. MYANMAR FISCAL MONITORING P. 2 1 2.2 Education sector S pending on education by the Ministry of Edu- cation (MoE) has increased as a share of total spending in 2022/23, following 2 years of de- clines. Education spending has increased year on year from 5.6 to 6.2 percent of total spending by authorities (Figure 16). Despite nominal increases in spending, because of high inflation, real (constant kyat) spend- ing on education is the same as it was in 2017/18. FIGURE 16 MOE ACTUAL SPENDING FIGURE 17 MOE EXECUTION MMK BILLION AND SHARE OF TOTAL PROVISIONAL OR TEMPORARY ACTUALS SPENDING BY AUTHORITIES (%) VERSUS BUDGET ESTIMATES (%) MOE SPENDING MOH SPENDING MOE BUDGETED SPENDING MOE SPENDING (% OF TOTAL, RHS) BUDGET EXECUTION RATE (%, RHS) 3,000 10% 3,500 120% 2,500 3,000 100% 8% 2,500 2,000 80% 6% 2,000 1,500 60% 4% 1,500 1,000 40% 1,000 2% 500 200 20% 0 0% 0 0% 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22* 2022/23 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22* 2022/23 Source: MOPF - https://www.mopf.gov.mm/; WB Staff estimates 2023/24 * Annualized spending/expenditure, which assumes doubling of spending/expenditure during the 6-month period between October 2021 and March 2022. 4 The “KG+12” system refers to Increased spending is attributable to restoring the budget ex- an educational framework that ecution rate to 95 percent in 2022/23, a level that matches the includes kindergarten followed by 12 years of primary and secondary pre-COVID levels (Figure 17). Budget allocations to MoE have education. The new Grade 12 is introduced in the school year remained nearly constant in nominal kyat terms in 2021/22 and 2023-2024. MoE retains students for one more year in the system. 2022/23. Increased spending against the budget can be at least Previously, students’ enrolment partially explained by the reopening of schools, colleges, and covered from KG to Grade 11 only. 5 Grade 12 textbooks and Grade universities in areas unaffected by unrest. The MoE has boosted 12 teachers in-service trainings its spending capacity through the continued implementation of attributed to the increased spending. the KG+12 system4, which includes the provision of new text- books, teaching aids, and other teaching-learning materials.5 MYANMAR FISCAL MONITORING P. 2 2 Furthermore, recruitment of new teaching and non-teaching staff, provision of school furniture, and the construction and ren- ovation of school infrastructures have contributed to increased spending. According to enrollment rates reported by the author- ities, enrollment increased to 6.7 million students in May 2022, from approximately 4.8 million in November 20216, indicating a potential return of more students to school which could also ex- plain increased spending. Consequently, both capital and current budget execution rates, 99 percent, and 94 percent respectively, have rebounded to levels before 2020/21. Despite the resumption of public education services, there has been a decline in enrolment, and a growing number of students are opting for non-state schools. This shift places a greater burden of per-student expenditure on households, raises questions about ensuring equitable access to education, and may be contributing to overall lower spending in the sector. The percentage of the population aged 6–22 years enrolled in educational institutions across the country has dropped from 69.2 percent in 2017 to 56.8 percent in 2023, while the percentage of non-state school children has increased from 5 percent in 2017 to 8 percent in 2023 (Bhatta et al., 2023). Between 2017 and 2023, the household educational 6 representing less than 50 expenditures pattern has changed, and educational expenses percent of the enrollment recorded in 2019–20 at 9.7 million. allocated to tuition and fees have increased, from 5 percent in FIGURE 18 SHARES OF DIFFERENT TYPES OF HOUSEHOLDS’ MONTHLY EDUCATIONAL EXPENDITURES, 2017–2023: 2017 (LEFT) 2023 (RIGHT) TUITION AND FEES PRIVATE TUTORING OTHETR 100% 100% 80% 80% 43 46 43 55 57 51 52 65 67 65 78 84 71 60% 82 86 80 60% 40% 40% 36 37 37 31 28 25 31 19 20% 26 22 27 20% 17 15 14 11 12 18 16 21 18 18 17 20 16 0% 5 5 7 4 4 5 6 8 0% MYANMAR RURAL URBAN Q1 Q2 Q3 Q4 Q5 MYANMAR RURAL URBAN Q1 Q2 Q3 Q4 Q5 LOCATION WEALTH QUINTILE LOCATION WEALTH QUINTILE Source: Bhatta et al., 2023 – Authors’ calculations based on Myanmar Living Conditions Survey (MLCS, 2017) and Myanmar Subnational Phone Surveys (MSPS, 2023). Note: Only households with educational expenditures are included. MYANMAR FISCAL MONITORING P. 2 3 2017 to 18 percent in 2023 in the entire country (Figure 18). This substantial change indicates a preference for non-state schools, as state schools typically do not charge tuition and may only impose nominal fees of other kinds. Interestingly, this increase in the share of tuition and fees is more pronounced in urban areas than in rural areas, with the most significant impact observed in the wealthiest quintile. Conversely, it poses a sizeable financial challenge for poor households who may struggle to afford these additional costs. Recognizing changes in household educational expenditure levels in state and non-state schools provides some evidence of a shift in preference toward non-state education. Figure 19 categorizes households into three types based on their educational expenditures: (a) households with children who attended state schools only, (b) households with children attending non-state schools only, and (c) households with some children going to state schools and other children going to non-state schools. This data reveals a 5-percentage point decrease in the share of households with only state school attendees, and the shares of types (b) and (c) increased, indicating a noticeable shift in household preferences toward non-state education. The types (b) and (c) of households experienced larger increases in educational expenditures and simultaneously, even educational expenditures of type (a) house- holds with only state school children also increased. Specifically, the median educational expenditure of households whose children went to only non-state schools, and both types of schools, surged by 72 percent and 48 percent, respectively – in large part due to inflation. This data suggests that the rise in educational expendi- tures may be attributed to both a shift in enrollment from state to non-state schools and an increase in per-student costs in non-state education owing to rising demand. For low-income households, this transformation could further limit their options for education. MYANMAR FISCAL MONITORING P. 24 FIGURE 19 SHARE OF HOUSEHOLDS BY FIGURE 20 MEDIAN HOUSEHOLD EDUCATIONAL TYPE OF SCHOOL WHERE THE EXPENDITURE (PER STUDENT) BY CHILDREN ARE ENROLLED HOUSEHOLD TYPE PUBLIC ONLY PRIVATE ONLY PUBLIC AND PRIVATE 2017 2023 MEDIAN HH(PER STUDENT) EDUCATIONAL 100% 3 100000 92,500 5 7 6 80% 80000 EXPENDITURE (MMK) 67,500 60% 60000 53,845 92 45,566 87 40% 40000 20,000 20% 20000 16,961 0% 0 2017 2023 STATE NON-STATE STATE AND SCHOOLS SCHOOLS NON-STATE HH TYPE BY WHERE THEIR CHILDREN ARE ATTENDED Source: Bhatta et al., 2023 – Authors’ calculations based on Myanmar Living Conditions Survey (MLCS, 2017) and Myanmar Subnational Phone Surveys (MSPS, 2023). Notes: 1. Only households with educational expenditures are included. 2. Median was used instead of ‘mean’ to account for extreme values. 3. At the time of conducting this analysis, the exchange rate between the US dollar (USD) and the Myanmar Kyat (MMR) stood at US$ 1 = MMK 2,110.13. 2.3 Social protection sector S pending on social protection by the Ministry of Social Welfare, Relief, and Resettlement (MS- WRR) has remained constant. Social protection spending has remained around MMK 96 billion or 0.03 percent of total spending. In real infla- tion-adjusted terms, this translates to a 7 percent year-on-year decline. The execution of social protection spending improved in 2022/23. Nominal levels of spending were retained despite the reduced budget relative to a year earlier (Figure 21), owing to improved execution. Spending by MSWRR reached 101 percent of planned (budgeted) spending in 2022/23, up from 91 in 2021/22. The increase in spending since 2020/21 could be possibly explained by some resumption of cash transfer payments. The principal beneficiaries of this expenditure during the period appear to be 7 Before 2021, cash transfers under the Social Pension and the Maternal & Child Cash Transfer accounted for at least 47 percent initiatives – cash transfers account for a large share of the ministry of total ministry spending. spending.7 The expansion of cash transfer programs (particularly in Shan State and Ayeyarwady Region) between 2016/17 and 2019/20 MYANMAR FISCAL MONITORING P. 25 explains the increase in spending during the period. Execution is higher for capital spending, albeit it makes up a very small share of the ministry’s spending. Overall budget allocations and spending remain low (see previous Budget Brief ). FIGURE 21 MOSWRR’S OVERALL BUDGET EXECUTION FIGURE 22 MOSWRR BUDGET EXECUTION MMK BILLION AND SHARE OF TOTAL PROVISIONAL OR TEMPORARY ACTUALS SPENDING BY AUTHORITIES (%) VERSUS BUDGET ESTIMATES (%) MSWRR SPENDING MSWRR SPENDING (% OF TOTAL, RHS) CAPITAL EXECUTION RATE (%) CURRENT EXECUTION RATE (%) 160 0.45% 250% 140 0.40% 120 0.35% 200% 0.30% 100 0.25% 150% 80 0.20% 60 100% 0.15% 40 0.10% 50% 20 0.05% 0 0.00% 0% 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22* 2022/23 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2021/22* 2022/23 Source: MOPF - https://www.mopf.gov.mm/; WB Staff estimates * Annualized spending/expenditure, which assumes doubling of spending/expenditure during the 6-month period between October 2021 and March 2022.