Establishing an Export Credit Guarantee Scheme to Support Myanmar Exporters?: An Exploration

Myanmar's trade deficit has widened dramatically in the past few years. One of the reasons lies in the lack of trade finance for exporters and certain financial sector shortcomings more generally. This policy note introduces the idea of establishing a public Export Credit Guarantee Scheme (ECGS) and explores if and how this policy measure could support the rebalancing of Myanmar's trade deficit. Such a scheme could help relieve export constraints by: first, facilitating access to credit for exporters by mitigating risk and increasing banks' willingness to lend; second, helping exporters to offer better payment terms to importers; and third, contributing to enhance confidence in Myanmar entities (both banks and enterprises) among foreign entities. Looking at the experience of other countries, the policy note also points to a number of guiding principles that policymakers should consider when pondering the idea of setting up an ECGS. Moreover, it highlights that certain challenges have to be expected. First and foremost, given the low level of financial sector development and limited existing knowledge on trade finance, it is questionable whether the necessary skills and capacities to properly operate such a scheme are available in Myanmar. Seeking international support can help to address this issue. A practical way forward might be to pilot an ECGS with a rather small portfolio of products that targets one or a few sectors to test the ground while limiting the public resources at risk.