Myanmar’s currency, the kyat, is continuing its rapid devaluation and has reached a record low against the US dollar and other major currencies in the course of August. The Central Bank of Myanmar on August 5 changed its reference exchange rate to the US dollar from 1,850 to 2,100 kyat, while the market price for the greenback at money lenders shot up to 2,600 kyat. The national currency keeps being under pressure from the adverse economic environment caused by Covid-19, unfavourable decisions by the military junta and global economic issues including supply chain problems and inflation which impact Myanmar’s foreign…
Myanmar’s currency, the kyat, is continuing its rapid devaluation and has reached a record low against the US dollar and other major currencies in the course of August.
The Central Bank of Myanmar on August 5 changed its reference exchange rate to the US dollar from 1,850 to 2,100 kyat, while the market price for the greenback at money lenders shot up to 2,600 kyat.
The national currency keeps being under pressure from the adverse economic environment caused by Covid-19, unfavourable decisions by the military junta and global economic issues including supply chain problems and inflation which impact Myanmar’s foreign trade.
The unofficial street rate has since spiked to up to 3,400 kyat per US dollar, local reports say.
The current rates are all a far cry from the reference exchange rate of 818 kyat per US dollar which was imposed in 2012 under a managed float currency regime as part of economic reforms by the country’s former civilian government.
US dollar exchange rate could go up to 5,000 kyat
The recent monetary regulatory changes in the country, the dwindling supply of foreign currency, as well as rising interest rates across the region leads traders to estimate that the kyat exchange rate to the US dollar could go as high as 5,000, according to the reports.
They added that Myanmar people are increasingly opting to trade in their cash for stronger currencies and gold or hard assets, such as real estate and motor vehicles.
Apart from the new reference rate, Myanmar’s central bank issued a directive that export companies are required to convert 65 per cent of their foreign currency held to kyat. The firms have 30 days to use the remaining foreign currency to purchase imported goods or make other cross-border payments.
Authorities may take legal action against companies that fail to comply with these measures, the central bank warned.
Cross border trade impacted
The military government says it is implementing the policies to “incentivise exporters to conduct business through legal means.” However, the new exchange rate has resulted in cross-border trade disruptions as some traders, including those on the Myanmar-Thailand border, have stopped imports due to making losses. Online shops that rely on cross-border trade have also stopped selling products.
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