(Reuters) - The Asian Development Bank (ADB) said on Monday it was resuming operations in Myanmar with a $512 million loan for social and economic projects that would help the country build on reforms since a military government stepped down in 2011.
In a separate statement, the World Bank said its board had approved a $440 million credit for Myanmar and that, as with the ADB, it was now fully able to support the country's development because debt arrears had been cleared with the help of Japan.
Myanmar President Thein Sein, who heads a quasi-civilian government, has freed political prisoners, unmuzzled the media and begun to reform the economy with a new foreign investment law and an exchange rate determined more by market forces.
In response, Western countries have eased sanctions imposed on the military regime. International financial institutions have offered mostly technical help but have been constrained until now by debt arrears accumulated under the military.
The Manila-based ADB said in a statement that bridge financing provided to Myanmar by the Japan Bank for International Cooperation (JBIC) this month allowed the government to pay off arrears to the ADB of about $500 million.
The World Bank, in its statement from Washington dated January 27, said its loan would be used in part to "help the government meet its foreign exchange needs", which included repaying the JBIC's bridge loan.
The World Bank arrears had been put at about $400 million. Japan, whose government and companies have been particularly active in the former Burma since it opened up, had said it would help with the arrears, which were preventing international bodies from offering fresh loans.
The ADB, which reopened an office in Yangon, Myanmar's commercial capital, in April 2012, said the clearing of arrears allowed it to provide its first loan to the country in more than 30 years.
Thein Sein's government has had to start practically from scratch in developing a modern economy. Reflecting that, the ADB said it would focus on "the building blocks for stability and sustainability".
Among other things, it would look at improving public finances and developing the finance sector.
The loan would be used to "finalize arrears clearance and sustain government efforts to revamp the national budget process and modernize tax administration", the ADB said.
"In rural areas, where development has been hindered by lack of infrastructure, restrictions on land usage, poorly developed support services and limited access to financial services for farmers, ADB funding will help develop a strategy to make banking services more widely available," it said.
The World Bank said its credit would support reforms to strengthen macroeconomic stability and to improve public financial management and the investment climate.
It said that, over the past year, it had opened an office in Yangon and brought in technical experts to help the government develop a broad development program. The government put a detailed program to a big aid donors' conference in the capital, Naypyitaw, on January 19-20.
The World Bank said it had already provided an $80 million grant for improvements to rural infrastructure, including schools, health clinics, roads and irrigation schemes in about 640 villages across Myanmar over six years.
The International Monetary Fund said on January 17 the government had asked for its help to pursue reforms and craft economic policies so that Myanmar could become part of the global economy.
(Additional reporting by Martin Petty; Writing by Alan Raybould; Editing by Richard Borsuk and Paul Tait)