As the kyat continues to depreciate, the Central Bank of Myanmar (CBM) revoked the licenses of 13 more currency-exchange companies on Monday, raising the number of such licenses revoked to 45 within the last 10 months, according to announcements from the junta-controlled central bank.
Economists and currency traders describe the move as an effort by the junta to gain more control of foreign currency flows within the country and a futile effort to prevent the national currency from depreciating further.
Last October, the CBM revoked the currency-exchange license of Thomas Khanno Co Ltd, saying in its announcement that the company had failed to comply with the CBM’s rules and directives. In January, it revoked the license of Mandalay Capital Co Ltd.
In March, it revoked the currency-exchange licenses of 20 companies, including Myanmar National Airlines, and in July, it revoked 10 more.
In each announcement, the CBM repeats the same reason, saying the license holders failed to comply with its rules and directives. However, junta-owned media give another reason, saying the kyat is trading against the US dollar at higher rates in “black” or “unofficial” markets than the rate set by the CBM.
U Ngwe Thein, a retired Myanma Economic Bank executive, said the junta wants to go back in time. CThe military council wants to take control of foreign currency and that’s why they are revoking the licenses. They still want to go back to what we experienced in the past before the [democratic] transition,” he explained.
Before the political and economic liberalization began in 2011, people in Myanmar could only sell and buy US dollars at a very limited number of banks permitted to conduct currency-exchange services.
These restrictions, however, created a black market. People who needed to exchange foreign currency into kyats or vice versa relied on illegal traders whose rates were higher than the fixed rates imposed at the limited number of banks allowed to conduct foreign-exchange services.
The CBM’s current reference exchange rate is 2,100 kyats per US dollar. On the black market, the rate is 3,500 kyats per US dollar.
In a curious statement in March it admitted its rate was far below the “unofficial market rate” rate, but seemed to imply that it was doing what it could though its hands were tied. ”However, there is no way to set the new price, as per the notification released on 15 Jan,” the statement said.
The CBM has blamed the depreciation of the kyat on market manipulation and malicious rumors.
A CBM statement in March called on banks to investigate “fraudsters” circulating rumors.
The CBM might be “brainless,” a director of a currency-exchange company that had its license revoked this year said.
“We just sold and bought based on the changing market prices day to day. We didn’t make any mistakes. But they contacted us and said our license was revoked. So, if we look at all these actions of the CBM, it is obvious its leadership is brainless or they are fully under the control of the junta,” he explained.
The CBM is just trying to cover the junta’s economic failures and the devaluation of the kyat caused by the economic distress induced by the coup, he added.
The exchange rate between the kyat and the Thai baht has increased from 80 to about 100 kyat per baht in six months, while the exchange rate between kyat and the yuan has risen from 400 to about 500 kyat per yuan in the same period.
One merchant said that exchange rates are fluctuating so wildly that they cannot be kept track of in real time and have to be negotiated by conversation, explaining: “Now the rates are changing inside people’s mouths.”
“Most people don’t dare to trade currency. The exchange rates are still getting higher and higher and there is fright [in the market],” the merchant added.
The junta’s announcement on July 23 that a new 20,000 kyat banknote would be introduced at the end of July made the situation worse. Public trust in kyat tumbled. This had a damaging impact on the gold and foreign-exchange markets and sparked inflation panic.
The decision by Singapore-based United Overseas Bank to stop transactions with Myanmar businesses as a result of US sanctions on Myanma Foreign Trade Bank and Myanma International Commercial Bank led to the kyat’s further devaluation.
Prof Min Min Thaw, a senior lecturer in Economics at California State University, told The Irrawaddy that the CBM is staffed with unqualified personnel.
“No one can trust them and exchange rates can’t be stabilized,” she said. The new 20,000 kyat banknotes is a signal that in Myanmar hyperinflation is around the corner, she said.
