The World Bank is about to resume lending to Burma for the first time since 1987. Together with its investment branch the International Finance Corporation and the Asian Development Bank, the World Bank has opened its first offices in the former capital, Rangoon (now Yangon). The ADB has also set up shop in the capital Naypyidaw, becoming the first international financial institution to do so. All lending was suspended almost 25 years ago when Burma stopped its repayments.

Burma’s return to the borrowing market is reinforced by Japan’s plan to extend around $900m in bridging loans to the embattled South East Asia nation. Tokyo also announced in April that it would forgive about $3.7bn in bilateral debt.

The Japanese plan will also provide Burma with a temporary loan that will enable it to repay around $500m owed to the ADB and over $397m in interest and principal owed to the World Bank on an outstanding debt of $700m.

All the back-log of arrears will have to be cleared up before any lending from international institutions can recommence. Lending will also require a change in the American position toward Burma, as the World Bank’s biggest stakeholder. The US currently cited Burma’s lowest possible ranking in the state department’s index of human trafficking in its opposition of offering World Bank assistance.

Pamela Cox, World Bank vice-president for East Asia and Pacific, has announced $85m in community development grants ahead of the arrears clearance, and praised the Japanese initiative as a possible solution to facilitate the repayments.

“We are not cancelling the debt. We are just clearing the back interest payments. Then they’ll start repaying it again,” she told the Financial Times.

The announcement comes as violence intensifies between Buddhists and Rohingya Muslims in the Northern Burma.

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