As part of a revamp of its currency system, Burma has created a 10,000-kyat bank note (about US$ 12), which will go into circulation on June 15.
The Central Bank of Myanmar on Thursday announced it would keep all other existing currency notes and coins as legal tender. The announcement was aired by MRTV state radio and television.
The creation of the note is designed to facilitate high-value transactions.
However, the introduction of the new banknote, which is two times that of the face value of the last 5,000 kyat note, is expected to draw public concern, and its impact on the financial market and commodity prices will be monitored, sources said.
Burma has 11 banknotes in circulation at this time: 50-pyas, 1 kyat, 5 kyat, 10 kyat, 20 kyat, 50 kyat, 100 kyat, 200kyat, 500 kyat, 1,000 kyat and 5,000 kyat.
On April 2, Myanmar started the adoption of a managed floating foreign exchange rate regime, moving the exchange rate from a peg of 8.5 kyat to a managed floating exchange rate.
The rate was quoted at 830 kyats per USD on Thursday, up from 818 kyat per USD when it was first applied.
Myanmar's foreign exchange rate against the U.S. dollar has been traditionally designated as around six kyat per U.S. dollar since 1975, while the market exchange rate fluctuated between 780 and 1, 000 kyats per dollar for the past several years, standing for most of the time around 800 kyat per dollar for the past year.
To eliminate illegal foreign exchange trading, 11 private banks have been granted as authorized dealers to open official money exchangers since Oct. 1, 2011 to enable official trade of three kinds of foreign currencies with kyat at a rate designated in line with daily exchange rate transacting in the international exchange market. The foreign currencies are the U.S. dollar, Singapore dollar and the Euro.
Earlier this year, Mizzima reported that an International Monetary Fund (IMF ) staff assessment team spent January in Burma gathering data and talking with key officials, in order to prepare an extensive analysis of the country’s prospects.
Their report can be obtained through the IMF at http://www.imf.org/external/pubs/ft/scr/2012/cr12104.pdf
The report said: “Myanmar could become the next economic frontier in Asia if, with appropriate reforms, it can turn its rich natural resources, young labor force, and proximity to some of the most dynamic economies, to its advantage. Delivering on these expectations is already under way.”
The IMF said the economic outlook is positive.
Real GDP growth is projected at 5 ½ percent in FY2011/12 and at 6 percent in FY2012/13 driven by commodity exports and higher investment, supported by robust credit growth and improved business confidence. Inflation, projected at 4.2 percent for FY2011/12, is expected to pick up to 5.8 percent in FY2012/13 as the recent drop in food prices phases out.
It cited a number of “key obstacles” that must be put in line with international standards, such as the deposit-to-capital ratio, onerous collateral requirements, administratively set interest rates, and segmented banking activities.
These controls and the exchange restrictions led to a large unregulated “shadow financial system,” the report said.
Also, “the regulatory treatment of state banks and private banks is uneven, bank governance is poor, and banking supervision does not follow the Basel Core Principles.”
In addition, there is no unified national electronic payments and settlement system, although plans are under way to develop the financial infrastructure.