As Kyat Soars, Foreign Bulls and Burmese Bears Spar on Growth

By Kyaw Hsu Mon 3 June 2016

RANGOON — The Burmese kyat has been the best-performing Asian currency against the US dollar so far this year, rising over 10 percent versus the greenback since January. While this trend has excited foreign investors, Burmese analysts remain skeptical about how well the currency’s buoyancy reflects the growth prospects of the real economy.

Bloomberg News reported Thursday that the kyat has outstripped the Japanese yen to claim the title of fastest-appreciating currency in Asia for the first five months of 2016.

“Some foreign observers said the kyat’s appreciation is a sign the economy is growing quickly,” Chit Khine, chairman of Eden Group of Companies, told the Irrawaddy. “But I disagree with that. The economy has been muddling along recently because the government’s economic policies are still unclear.”

“[Foreign investors], however, believe that the economy will grow quickly now that the government has changed,” he said.

The Burmese kyat, which was floated in 2011 under the previous quasi-civilian government, has been in flux over the past year, peaking at 1,310 kyats per dollar in December and bottoming out at 1,030 in January 2015.

On Friday the kyat-dollar rate closed at 1190:1, according to the Central Bank of Myanmar.

“Though the kyat has been strong over the last six months, [in Burma] business is slowing down, and we don’t know how the government will deal with that,” Chit Khine said.

Myat Thin Aung, chairman of Hlaing Tharyar Industrial Zone, said that kyat was undergoing seasonal and import-related fluctuations.

“During the rainy season, the currency exchange rate stabilizes,” he said, citing the seasonal slowdown in exports as a major factor influencing the rate.

But while he said optimism in the economy is not widespread, there is a new-found confidence in the kyat.

“People are not hoarding their dollars as much as in the past, meaning there are more people selling dollars,” Myat Thin Aung said, adding that this increased supply of the dollars has strengthened the value of the kyat.

Many businesses, however, have been waiting to see what new government policies will be unveiled and which foreign investment projects will be approved now that the Myanmar Investment Commission is undergoing reforms.

“We have to consider all the factors [that could affect economic growth], like a high inflation rate, a rising trade deficit and slowed business activity,” he said.

Maung Aung, senior economist for the Ministry of Commerce, said he does not believe the country’s economy will grow quickly in the near-term, and that the value of the kyat is not an indicator of overall strength in the economy.

“International observers are very optimistic, but for me, I don’t see high growth rates—the economy is stagnating now,” he said. “The Myanmar Investment Commission has also stopped approving new projects, putting foreign investment in limbo.”

International institutions, however, have released optimistic projections for Burma’s economic growth, with the Asian Development Bank predicting an expansion of more than 8 percent in 2016, a rate that, if achieved, would make the country one of the fastest-growing economies in the world.

But the government’s opacity regarding economic policy remains concerning, even for those on the inside.

“To promote economic growth, we need the right policies and more mutual understanding between the government and private sector,” the Ministry of Commerce’s Maung Aung said.