RANGOON — The Central Bank of Myanmar has halved the permitted withdrawal limit of US dollars for local bank customers, in an apparent effort to prevent the greenback from becoming an alternate currency in Burma—a move experts say is unlikely to succeed.
On May 27, the Central Bank issued an announcement ordering banks to limit US dollar withdrawals to $5,000 per customer, per day, down from the previous $10,000 limit.
The move comes as the kyat continues its steady depreciation against the dollar and a growing discrepancy between official exchange rates and those found at local currency exchanges. The Central Bank’s official exchange rate remains at 1090 kyats per dollar, while smaller and unlicensed operators are trading at around 1140 kyats.
Pe Myint, managing director of the Cooperative Bank, said that the restrictions would not stop the use of US dollars, particularly in the hotel and tourism sector, or address the local currency’s continuing fall in value.
“It’s very clear that, if customers can’t withdraw the amounts needed for their businesses, they will definitely buy dollars on the black market,” he said. “[Banks] still can’t buy enough US dollars to satisfy market demand.”
The kyat was floated in 2012, prior to which the government set the official exchange rate at a 6.4 kyats to the US dollar, about 125 times the value as the black market rate at the time of the float.
Business owners were likely to draw on their institutional experience of sidestepping Central Bank regulations in the wake of the latest regulations, according to Dr Maung Maung Lay, the vice chairman of the Union of Myanmar Federation of Chambers and Commerce Industry.
“This is only temporary solution for recent market problems,” he said. “Businessmen here don’t get assistance from the Central Bank, they always solve their problem by themselves. This time, or whenever they try to control the amount of US dollars in banks, they will look for other sources.”
Economist and author Aung Ko Ko said that the government needed to consider wider structural reform rather than implementing a piecemeal strategy.
“The major problem is the bigger trade deficit,” he said. “Local manufacturers can’t produce essential commodities to compete with regional imports. As long as the government can’t address this issue, the value of the kyat will continue to fall. If people trusted the value of their currency, they wouldn’t need to rely on foreign currency.”
Burma ran a trade deficit of $4.9 billion in the 2014-15 fiscal year, according to figures from the Ministry of Commerce.