(Mizzima) – Burma’s Central Bank will implement a managed, floating currency exchange rate in the country on Sunday designed to integrate its economy with other nations’ currency.
The foreign exchange rate will be published daily by the Central Bank, said the New Light of Myanmar, a state-run newspaper. Replacing the official exchange rate, which has been pegged since 1977 at the level of 8.5 kyats is the first step toward unifying various currency exchange rates and for allowing room for the Central Bank to influence the market exchange rate.
A team lead by the International Monetary Fund is now at work helping Burma modernize its financial structure.
Mizzima reported in January that Meral Karasulu, the deputy division chief of the Asia and Pacific Department at the International Monetary Fund, who led the IMF assessment team, said in a statement: “Burma has a high growth potential and could become the next economic frontier in Asia, if it can turn its rich natural resources, young labor force, and proximity to some of the most dynamic economies in the world, into its advantage.”
Modernizing Burma’s economy would require changes to enhance the business and investment climate, modernizing the financial sector, and further liberalizing trade and foreign direct investment, she said.
She noted that the parallel market exchange rate of the kyat has appreciated by about 32 per cent in nominal effective terms since end-FY2009/10. The appreciation pressures are primarily due to large foreign inflows into the economy, which cannot find an outlet due to exchange restrictions on current international payments and transfers, she said.
She said that technical work by the Central Bank of Myanmar (CBM) was already under way to establish the necessary market structure. Ultimately, the unification of the exchange rate would require moving away from the “export first” policy, she said.
In light of the appreciation pressures, she said certain exchange restrictions can be removed immediately, for example, by allowing the use of all foreign currency bank account balances for imports, easing import licensing requirements and access to the newly established foreign exchange retail counters.
“A successful exchange rate unification would require improvements in all areas of macroeconomic management,” she said. “This will have to start with establishing a monetary policy framework to focus on price stability. The authorities’ plan to grant operational autonomy and accountability to CBM is a welcome first institutional step towards this goal.”