Myanmar currency suffers record downtrend against US dollar

14 September 2021
Myanmar currency suffers record downtrend against US dollar
Myanmar Kyat notes. Photo: AFP

On the black market, the Kyat recently dropped to a record low of 2,020 (K2,020) against the US dollar, the military-controlled Central Bank revoked its directive of a maximum difference of 0.8 per cent between buying and selling prices of the American currency.

The Central Bank of Myanmar fixed K1,700 per dollar due to the official 0.8 per cent difference. As a result, there was no currency exchange at the banks and other financial organizations, while it occurs in the black market, reaching up to the record high K2,020 per dollar without a limited amount.

“We estimated that the maximum exchange rate would reach K2,800 per dollar. However, the currency value would worsen if the United States faced any crisis in unexpected global political situations,” said a source from foreign exchange services.

“The rising US dollar price is happening only in Myanmar. It is not because of global economic trends, but because of political situations and mismanagements in the country. Although the exchange rate is soaring in the black market, the buying and selling of US dollars are under limited as it is seen as a risky market with possible of serious loss,” added the source.

Myanmar importers have to buy the US dollar for their payment, causing a high price of imported items, as they are struggling to maintain their reliability in the foreign trade sector.

“Payment for imported goods should not be delayed despite soaring exchange rate. Otherwise, Myanmar importers would be blacklisted and regarded as untrustworthy partners to stop the exports selling on consignment. Some importers are now watchful of the prevailing situation, and we are worrying about there will no more allowed consignments in the future,” said a businessperson in the construction industry.

Businesspersons have remarked the shortage of the American dollar will impact the government agencies in their payment of foreign currency, while the local banks and businesses lack the US dollar.

They also concluded these problems have resulted from the decline of local currency value, the lack of guarantee, political instability and mismanagement.

Due to unstable Myanmar currency and partial halt of banking services, people have purchased dollars and gold instead of investing in business, leading to the prevailing financial crisis.

“There has been a shortage of US dollars in the country as people are holding it instead of purchasing property and automobiles amid an uncertain future. The US dollar has dried up in the hands of businesspersons. It was piled up by the wealthy and some of them put their American dollars in their foreign bank accounts. It is leading to a trend of insufficient US dollars in the country for import payment. The financial market and economy of the country have a domino effect. It cannot be prevented by guns,” said an expert in banking services.

The withdrawal and departure of foreign investments due to the political crisis have also deterred the inflow of US dollars into the country.

The junta has been left with fewer natural resources which were sold by their forerunners under successive military regimes.

“The next mismanagement is the change of period for the financial year. The budget year should not be changed frequently as the international business community is always monitoring it. The junta should turn their focus to selling gems and natural gas. However, it is an inappropriate time for it amid the countrywide armed clashes at present,” said a banking expert.

The country has experienced the withdrawal of foreign investments, closures of domestic businesses and a rising unemployment rate. The World Food Programme has estimated in April this year that up to 3 million more people, particularly in urban centres of Myanmar, will be hungry within the next 6 months.