Myanmar currency drops 60% in four weeks, economy emerges

People line up outside a bank to withdraw money in Yangon. Photo: REUTERS / File

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People line up outside a bank to withdraw money in Yangon. Photo: REUTERS / File

Myanmar’s currency has lost more than 60% of its value since early September in a collapse that pushed up food and fuel prices in an economy stalled since a military coup eight months ago.

“This will shake the generals because they are quite obsessed with the kyat rate as a larger barometer of the economy, and therefore a reflection on them,” said Richard Horsey, a Myanmar expert at the International Crisis Group. .

In August, the Myanmar Central Bank attempted to keep the kyat at 0.8% on either side of its benchmark rate against the dollar, but dropped out on September 10 as pressure on the exchange rate intensified. The dollar shortage has become so severe that some money changers have lowered their shutters.

“Due to the volatility of currency prices right now… all branches of the Northern Breeze foreign exchange service are temporarily closed,” the changer said on Facebook.

Those still operating cited a rate of 2,700 kyat to the dollar on Tuesday, up from 1,695 on September 1 and 1,395 on February 1 when the military toppled a democratically elected government led by Nobel laureate Aung San Suu Kyi.

In a report released on Monday, the World Bank predicted the economy would collapse by 18% this year, in part due to the pandemic, and said Myanmar would experience the region’s largest employment contraction. and that the number of poor people in the country increase.

Growing economic pressures come amid signs of an upsurge in bloodshed, as armed militias have become more daring in clashes with the military after months of protests and strikes by junta opponents. “The worse the political situation, the worse the exchange rate will be,” said a senior executive at a Burmese bank, who declined to be named.

Myanmar is also struggling to cope with a second wave of coronavirus cases that began in June with authorities’ response crippled after scores of health workers joined the protests. Reported cases have peaked although the true extent of the outbreak remains uncertain.

Home stay orders in some cantons have been withdrawn, but are still in force in some regions.

In the months immediately following the February 1 coup, many people lined up to withdraw their savings from banks and some bought gold, but a jeweler in Yangon said many desperate were now trying to resell their gold.

The central bank gave no reason why it abandoned its managed float strategy earlier this month, but analysts believe its foreign exchange reserves must be seriously depleted.

Central bank officials did not respond to calls for comment on how much currency was left, but World Bank data shows it only had $ 7.67 billion in reserves at the end. from 2020.

After pulling out of its managed float, the central bank spent another $ 65 million, buying kyats at a rate of 1,750 to 1,755 to the dollar between September 13 and September 27.

The bank manager said the central bank’s efforts had had limited impact on a trusted private currency market.

The economic crisis has pushed up the price of basic foodstuffs, and the United Nations Office for the Coordination of Humanitarian Affairs said this week that around three million people are now in need of humanitarian assistance in Myanmar, up from one million. before the coup.

A 48-kilogram bag of rice costs 48,000 kyat, up nearly 40 percent since the coup, while gasoline prices have nearly doubled to 1,445 kyat per liter.

The crisis is also affecting businesses, especially those that need to import raw materials.

A plastic bag maker in Yangon said it was forced to raise prices and sales fell by around 30%.

The gross domestic product per capita was only $ 1,400 last year, and Zaw, a resident of Yangon who asked to use only part of his name, had no illusions about the direction that was taking Myanmar.

“People will get poorer.”

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