Dollar Exchange Rate Climbs, Shakes Up Burma’s Business Community
By Kyaw Hsu Mon 17 November 2016
RANGOON — The US dollar exchange rate—at its highest since the new government came to power in April—has Burma’s business community looking for better trade policy.
“In the black market, the exchange rate is currently 1306 kyats [US$1] per dollar; it’s too high for importers. If the import demand increases, it could impact the prices of daily commodities, making them increase, too,” said U Zaw Min, a rice trader in Rangoon.
The Central Bank of Myanmar places the official exchange rate at 1287 kyats per dollar. Observers say that a major cause for the spike in the exchange rate is less foreign direct investment to Burma, while local demand for imported items has increased.
“It’s good for [foreign] exporters, since the value of their dollar is strong,” he said.
U Ye Min Aung, the newly elected vice president of the Union of Myanmar Federation of Chambers and Commerce Industry, told the Irrawaddy that Burma’s business could be facing trade troubles if the government is unable to get a handle on the situation soon.
“This is the time when the government must act decisively, must create a better trade policy—one that actually works,” U Ye Min Aung said. “For example, exporting rice to China is legal in Burma, but in China, it’s illegal to import rice from Burma, so earnings from rice exports don’t come into the local banking industry,” he said, adding that rice is Burma’s major export item.
“Rice exports amount to 1 million tons per year and could yield US$400 million per year, but not all of that money comes here,” he said.
China officially banned rice imports from Burma in 2014, but in lieu of assurances that most rice be milled and meet certain quality standards, the trading rice across the Sino-Burmese border accounts for a majority of Burma’s total rice exports.
U Ye Min Aung also stressed that Burma’s foreign direct investment between April and September has also declined and might be playing a role in the high dollar exchange rate.
“A long-term solution would be to reassess trade policy,” U Ye Min Aung said.
U Khin Maung Nyo, an economist, echoed that the Central Bank must step up and address Burma’s trade woes.
“It seems like the Central Bank isn’t taking any responsibility, but it must,” U Khin Maung Nyo said. “Everything is related. Demand for imported items is increasing, and consumers will be the ones who are harmed by the impact.”