The junta is now blaming some unnamed banks for Myanmar’s currency crisis and accusing them of disloyalty, an approach economist Sean Turnell—an expert on Myanmar’s economy—described as “simply perverse.”
His comments follow a press conference held by the military junta’s State Administration Council (SAC) on Tuesday in Naypyitaw, where SAC spokesman General Zaw Min Htun said that plenty of support had been given to banks to help them overcome the banking crisis that emerged after the coup.
“We have been giving great assistance to the banking system so that it does not collapse. Some banks even had to get support from the Central Bank. But some of them are not so loyal,” Zaw Min Htun told the press conference.
He did not name the disloyal banks, but warned that—in response to soaring foreign exchange rates—the regime will continue monitoring the activities of banks as well as the Union of Myanmar Federation of Chambers of Commerce and Industry. The federation is Myanmar’s largest private-sector advocacy group.
Turnell, a former economic adviser to the ousted civilian government led by the National League for Democracy, told The Irrawaddy that the junta has created an economy in which it is not possible for sound banking to take place.
“Calling for loyalty from banks to a regime that is the perpetrator of Myanmar’s economic catastrophe is simply perverse,” he said.
About one month after the February 2021 coup, customers of the military-owned Myawaddy and Innwa banks attempted to withdraw all their money. To prevent massive withdrawals from the banks, the junta-controlled Central Bank of Myanmar (CBM) limited the amount that people and businesses were allowed to withdraw.
Trust in the banking sector fell further after these controls were implemented.
Customers of the two banks—both individuals and businesses—are still unable to fully withdraw their savings from the banks. The daily maximum amount that can be withdrawn via an ATM is still 1,000,000 kyats.
General Zaw Min Htun also said that the regime will take action against those he accused of causing foreign exchange rates to be unstable—greedy businesspeople.
The CBM warned early this month that the banks found to be negotiating exchange rates outside of its online platform will be fined and risk revocation of their licenses.
Though the CBM’s fixed reference foreign exchange rate remains at 2,100 kyats per USD, the CBM allows banks to sell the greenback to importers at 2,920 kyats per dollar through an online trading program separate from the interbank platform, which it opened in June of this year.
Zaw Min Tun also admitted that the regime has been buying US dollars at 2,900 kyats per dollar (from exporters) and selling them back at only 2,920 kyats. He also admitted that the market rate is now a minimum of 3,500 kyats per dollar.
“If we are not calling them avaricious and greedy men, whom should we call [that]?” he asked.
At a meeting held by the CBM on August 19, it said it would form a task force comprising officials from the Bureau of Special Investigation, an intelligence agency, a security service, and a department under the Ministry of Home Affairs to bring the soaring foreign exchange rates and gold prices under control.
The task force will scrutinize and investigate businesses that have been manipulating market prices, regime officials said. Daw Than Than Swe, the CBM governor, also warned Myanmar people not to hoard dollars and other foreign currencies. She said permission is required to hold foreign currencies. Moreover, only a maximum of $10,000 or the equivalent amount of other foreign currencies can be held and and only for a maximum of six months, she said.
To avoid hoarding, the CBM said that after six months holders of foreign currency must sell the money to specified banks at a fixed rate set by the CBM. For example, the regime’s official exchange rate for the US dollar is 2,100 kyats.
Myanmar has been hit by soaring inflation since the military coup in 2021 and the regime’s attempts to cool it down have failed. The latest blow came early this month with the junta’s circulation of a new 20,000-kyat banknote, which only sparked inflation panic among the public.
Turnell dismissed the possibility of a recovery in the coming months or the next year, saying a further decline in Myanmar’s economy was more likely since the root cause of all the problems is the junta regime’s disastrous economic mismanagement.
The junta’s economic mismanagement is the “central cancer,” he said.
Low growth, a collapsing currency, rising inflation, chronic budget deficits, out-of-control printing of money, a widening trade deficit, rising indebtedness, a fragile banking system, surging unemployment, and the accelerating criminalization of the economy, “are all symptoms of this central cancer,” he said.
