Myanmar’s kyat currency may prove to be unstable in the coming months due to a combination of election outcome uncertainty and deterioration in the country’s trade balance, a business assessment for 2015 predicts.
The recent weakness witnessed by currencies across the region will act as a drag on the kyat, making further rounds of de facto devaluation highly likely, the UK risk assessors BMI Research said in its April report.
“With the trade balance likely to continue to deteriorate as capital goods imports grow along with rising investment, downside pressures on the kyat will remain,” BMI said.
“In order to adopt a more sustainable fiscal path going forwards, the government will need to diversify away from resource-derived revenue into more taxbased revenue. Still, with the composition of Myanmar’s next government very much in question ahead of this year’s general elections, it remains unclear how the government will react.”
Myanmar’s fiscal trajectory “may be particularly volatile” with much depending on political developments over the coming year, BMI said.