Burma Launches Managed Float of Kyat

People exchange Burmese kyat banknotes at a local bank in Rangoon on the first day of the new managed floatation on Monday. (Photo: Reuters)

Burma’s Central Bank has embarked on a managed float of the national currency the day after pro-democracy icon Aung San Suu Kyi won a landmark victory in parliamentary by-elections.

A rate of 818 kyat to the US dollar was set on Monday—a vastly more realistic figure than the previous tethered rate of 6.4 kyat—which is hoped will make the isolated economy attractive to foreign investors.

The kyat previously had both an official and black market rate which was the source of huge corruption. Accounting would be done at the official rate with commodities sold abroad at the realistic rate with the difference lining the pockets of cronies of the former military regime.

Despite this method of graft seemingly being removed by Monday’s announcement, the Central Bank will continue to manage occasional interventions in the market to support or depress the currency, according to a statement. A daily reference exchange rate will also be published to influence the currency.

Economist Sean Turnell, a professor at Macquarie University in Sydney, Australia, told The Irrawaddy last week that a managed flotation of the kyat would allow the Burmese Central Bank “to intervene in the foreign exchange market to influence the exchange rate, though not to determine any particular set value.”

Analysts believe that firms which were permitted to use the old official rate also benefited as their import costs were much lower when compared with those who had to use the black market rate.

“Foreign investors can now have certainty about the security of their investments in the country,” Tony Nash, managing director of IHS Global, told the BBC on Monday.

The flotation coincides with President Thein Sein’s upcoming visit to Japan when he is expected to lobby for resumed investment. There is also a review by the European Union of its economic sanctions against Burma due on April 23, and it appears increasingly likely that some restrictive measures will be removed in the wake of Suu Kyi’s victory on Sunday.

Sweeping new laws— including tax breaks of up to five years, the right to lease real estate from the state or private hands for up to 30 years, allowing 100 percent repatriation of profits, and the right to distribute products locally—are also expected to be passed by the Burmese Parliament in the coming months in a bid to attract foreign investment.

4 Responses to Burma Launches Managed Float of Kyat

  1. “…including tax breaks of up to five years, the right to lease real estate from the state or private hands for up to 30 years, allowing 100 percent repatriation of profits, and the right to distribute products locally…”

    Can this most cruel, most inhumane military government get more supine than that? And the so-called “Opposition” more silent and colluding?

    “Get Quick Money At Any Cost To Be Like Singapore” seems to be the aim in life for both the government and the so-called “Opposition”.

    IMF will have the best, the most obedient client ever to the applause of all the financing governments and institutions.

    Shame,otherwise occupied with this all important and impotent election, no one had time to tell the 60 millions Burmese of what is involved in this “Floating of the Kyat” business and what are the likely outcome by the government, the “dissident” journalists or the people’s champions.

    May be it doesn’t matter these illiterates don’t know. They wouldn’t understand anyway. They can simply wait for the shoe factories after their lands are occupied. “Bulldozers” will tell them.

  2. Ohn,

    Whilst that chip on the shoulder is entirely understandable, you could do with a little less patronizing. Be fair, Burma has one of the highest rates of literacy in the world, and most ordinary folk are too preoccupied with putting food on the table.

    I agree the media has a duty to explain, analyse and warn the policy implications to people of what is really important for that very same act i.e. putting food on the table.

    International capital has arrived with a vengeance and the all too easy and supine accommodation of this by the ‘newly democratic’ govt can have dire consequences to both the natural environment and the peoples of Burma.

  3. This whole thing about floating the KYATS is all a “scam” reasons being there is nothing to indicate that the value of the Kyat should be “so-called” float at US$1 – K818, and the so-called MANAGED float what does it mean. The whole central banking systems in Myanmar is at a loss now with people with very little experience to run the operations and taking orders from also inexperience the JUNTA on how to managed the currency, as we understand they(junta) will decide how they want the currency to perform each day the banks await for instructions from central bank officials. The back door central bank is also dealing with some kind of money markets.Its very obvious that the sincerely of floating the Kyats is all but a “scam”.

  4. the media, plus people with heart and brain, should be aware of the cultural risks posed for this opening….cultural erosion, risks to have a second Thailand…so we, all together, we must do something, considering that also in Tatmadaw there are persons with the same view, same fears…
    I go to Myanamar regularly, and in recent years i have seen a sad drop in local traditions, starting to dresses….less longy, more girls dressed Bangkok style……

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