Myanmar’s ailing currency shed another 13 percent of its value this month – and the price of gold hit a record high in the domestic market – as armed conflict and inflation continue to devastate an economy that just four years ago was considered a rising star in the region.
The kyat was trading at 5,400 to the US dollar on Wednesday, up from 4,800 at the beginning of this month. In the month before the Feb. 1, 2021 coup, it was trading as low as 1,300 to the greenback.
The price of gold hit a record high in the domestic market on Wednesday, rising above 6.8 million kyats per tical (16.33 grams) for 24 karat gold.
The kyat also plunged against the Thai baht and China’s yuan. It now costs 141 kyat to buy a single baht, compared to 120 early this month, while the market rate for the yuan has fallen to 700 kyats in the domestic market from 640 in the first week of July.
“People are saving gold because of fighting, distrust in the regime and high inflation,” a currency trader in Yangon said. “So, gold prices have surged, and prices of other commodities have also increased based on [rising] gold prices.”
Price volatility is rising due to shortages of goods and food, the currency trader said, adding: “Under such circumstances, sellers charge the prices they want.”
The price of gold has risen more than 500 percent since the coup. Before the putsch, it was 1.3 million kyats per tical.
Business owners say inflation and the currency crisis will worsen in August when a new monthly allowance for civil servants kicks in. The regime said it will pay government staff an additional 30,000 kyats per month starting next month.
Consumer prices go up every time the government gives allowances to its staff, the business owners explained. One explained that the junta will need to print more money to pay the allowances and that this will spur inflation, which will continue to undermine the currency and drive up prices.
“The kyat will continue to decline,” he said.
Myanmar’s political crisis will continue to destabilize the market and fan volatility in exchange rates, he said, adding that volatility undermines the ability of businesses to operate.
He said that questions about how China will handle the conflict between the junta’s military and the Myanmar National Democratic Alliance Party and the junta’s frequent policy changes create uncertainty.
The Bureau of Special Investigation under the regime’s Defense Ministry recently warned gold dealers that they will face legal action if they do not sell the precious metal at the rate set by the junta-controlled Yangon Gold Entrepreneurs Association.
“We were summoned and questioned by the Bureau of Special Investigation … We were told to sign a document saying we would sell according to the reference rate [before we were released],” one gold dealer said.
The latest reference rate announced by the gold association, on June 4, was 4.6 million kyats per tical.
