Most Burma watchers will rightly have their eyes fixed on this Sunday’s much-anticipated by-elections and the prospect of opposition leader Aung San Suu Kyi entering parliament. However, others will be crunching the numbers after the government announced significant currency reforms to come into force the same day. A managed floating exchange rate will begin on Sunday, April 1, for the kyat, allowing market forces to value the currency with input from the Central Bank of Myanmar (CBM). The decision wasn’t unexpected.
Importantly, this will end decades of dual currency valuations by the central government and the black market that enable corruption and money laundering to flourish through semi-official and unofficial rates. Officially, the kyat is pegged at around six kyat to the dollar, while on the black market one dollar can fetch 800 kyat. Deals are normally done at the official rate, but can be worth much more after the currencies are …
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Following Burma’s Money
According to the reliable information we’d received, from the experts familiar with the Union Central Bank about the ongoing matter of consolidating and transforming the current various exchange rates into single exchange rate, the official exchange rate for Kyat will be floated as per the prevailing market rate from coming 2012-13 Fiscal Year and the foreign currency expenditures in the Government’s budget and for the various ministries will be converted from Kyat at the fixed rate of 800 Kyats per US$.
“What I know so far is from First April the Kyat will be floated and all Government expenditures will be calculated with 800 Kyats a US Dollar rate. So all the laws and regulations and procedures required are to be done before that date,”
“One Vice-President of the Union Central Bank told us at a meeting that the transformation (of Exchange Rate) would begin from the First April. That decision is Union Bank’s solely and we don’t get involved and I don’t want to comment.”
According to the experts familiar with the matter the new exchange rate will be a managed-float as the Union Central Bank will be intervening in the currency market from time to time if required. There will strictly be only one exchange rate as other various existing rates such as FEC rate and Export-Earning rate will also be abolished.
U Myint the chief economic advisor to the president has concluded in his research paper that two things are essential to reform Myanmar’s exchange rate system and to bring it in line with regional and international practice. First is to unify the multiple exchange rates that now exist in Myanmar and second is to remove and liberalize the restrictions that now exist in the current account transactions of the country’s balance of payments.
U Myint also concluded in his paper submitted in last year National Workshop for Economic Development and Reform that undertaking both the above measures will go much beyond matters related to the exchange rate. It will involve making a serious effort at long overdue macroeconomic reforms. This will be a slow and arduous process. A soft landing is not in sight. However, it is hoped the kyat exchange rate problem which the country is experiencing at present, will serve as a wake-up call, and which also provides the political will to start the macroeconomic reform process without further delay.
About the author
Zhong Li is a tech journalist who covers the latest developments in artificial intelligence, robotics, and biotechnology. Zhong Li is passionate about exploring the ethical and social implications of emerging technologies.
