RANGOON — Two weeks since Burma’s general election on Nov. 8, the country’s reference foreign exchange rate has slid further against the US dollar, sitting at just under 1,300 kyat against the dollar as of Monday.
While the exchange rate hovered at around 1,270 kyat during the election period, as of Monday it was 1,299 kyat against the dollar, while the black market rate was believed to have tipped over 1,300 kyat for the first time since late October.
“The black market rate is over 1,300 kyat today because of the [higher] Central Bank rate,” said one speculator in Rangoon Division’s Pabedan Township.
At a meeting with tourism operators on Saturday, Central Bank of Myanmar (CBM) deputy governor Sett Aung told reporters the bank was seeking to reverse the local currency’s months-long depreciation in several ways, including by selling US dollars to local private banks in an attempt to drive down the value of the greenback.
The kyat has seen a 30 percent slide against the US dollar since January, partly as a result of the country’s widening current account deficit.
On Oct. 13, the CBM announced the revocation of foreign exchange licenses that had permitted holders to accept transactions in US dollars to encourage use of the ailing local currency. Some observers however voiced concern that the move would only drive demand for dollars on the black market.
“Export earnings are less than in the past and dollar demand is higher in the market,” said Than Lwin, a senior consultant with Kanbawza (KBZ) Bank. “The Central Bank has to be flexible with the rate, so the black market rate will be higher than the central bank’s rate. This will happen until the country has an open market, but I think this exchange rate will be the highest. It won’t reach higher than 1,300.”
Burma was expected to see a massive drop in agricultural export revenues after torrential floods inundated more than one million acres of farmland from July. In early October, the World Bank forecast a slowdown in economic growth for the 2015-16 fiscal year, due in part to flooding and a lack of new investment.
Than Lwin said the country’s economic outlook would brighten when the new government is formed in 2016, with the expectation of more international loans for local private banks and new investment.
Sett Aung also struck a positive note on Saturday, predicting a period of sustained growth ahead. To tackle inflation, he said the finance ministry should increase taxes, reduce government expenditure and offload government bonds.
However he admitted the process would not be easy, as a tax increase would not be broadly welcomed and the government would struggle to reduce expenditure as reforms continue.
“Here, the economy is growing by leaps and bounds. That’s why inflation is high,” he said.
