RANGOON — As the kyat continues its eight-month slide against foreign currencies, the Central Bank of Myanmar will soon set down punishments against businesses charging in US dollars, according to official sources.
In May, the Central Bank halved US dollar withdrawal limits and warned local businesses to cease pricing in the greenback. The admonition appears to have been unheeded by companies catering to foreign nationals, including numerous international schools, upscale restaurants and a swathe of hotel and tourism operators.
In the last week, local franchises of the US-based ice cream restaurant Swensen’s and Thailand’s The Pizza Company began pricing their menus in US dollars.
Win Thaw, deputy director general of the Central Bank’s Foreign Exchange Management Department told local media this week that measures to prohibit the use of dollar transactions for local services would be announced before the end of the year.
Dr Maung Maung Lay, vice chairman of Union of Myanmar Federation of Chambers of Commerce and Industry, said the Central Bank needed to intervene urgently to prevent the progressive dollarization of Burma’s economy, which he said was exacerbating the kyat’s fall in value.
“Other countries practice this custom and so should we: the kyat should be the only currency we accept,” he said. “The Central Bank has already announced that businesses dealing in foreign currency would have to accept kyats. This should already be in practice, but we have a weak enforcement environment.”
Central Bank officials refused to discuss details of what actions will be taken against businesses dealing in dollars. It is believed that senior figures within the bank have canvassed the introduction of fines for offending companies and other penalties for repeated non-compliance.
Recent interventions into the local currency market by the Central Bank have had limited effect on the kyat’s depreciation, which has been largely driven by a ballooning trade deficit. In turn, said Ministry of Commerce senior economist Dr Maung Aung, the flight into US dollars by worried locals was intensifying the kyat’s volatility.
“If government wants the value of the kyat to be stable, they will still have to address dollarization and local currency speculators,” he told The Irrawaddy.
Dr Aung Myat Kyaw, the chairman of the Union of Myanmar Travel Association, said that Burmese businesses were only trading in dollars because of uncertainty around the trajectory of the local currency.
“We can accept kyats instead of the dollar but we need a stable kyat value in the market,” he said.
The kyat was trading at 1310 to the dollar on the streets of Rangoon last week, before stabilizing between 1280 and 1290 in the days since.
