RANGOON — As the Burmese kyat continues its downward spiral, businesspeople claim foreign exchange counters are deliberately withholding US dollars to capitalize on their climbing value.
In an apparent attempt to prevent local reliance on the greenback, the Central Bank of Myanmar (CBM) in late May halved withdrawal limits from US$10,000 to $5,000, which experts warned would lead to price-gouging on the black market.
Last Friday the official exchange rate hit an all-time high of 1,105 kyats to the dollar, while black market prices soared to about 1,235 kyats. Consumers and businesspeople now say they are unable to buy dollars, even in small amounts, at private banks and forex counters, pushing them to black market sellers at distended rates.
“We can’t even buy small US notes, the counter girl said they did not have any,” a resident of Botataung Township told The Irrawaddy. She said she had tried to exchange small amounts at several private banks and forex counters, to no avail.
Those trading larger sums are also struggling to find dollars, which businesspeople said is already affecting retail prices because imported goods are mostly traded for USD. Myo Min Aung, vice chairman of the Myanmar Retailers Association, said the price of everyday consumer goods has already risen sharply.
“Foods and medicines are essential for users, and the prices are getting higher day by day,” Myo Min Aung said, “and as long as importers spend more on the dollar the prices will keep going up.”
Bankers attributed the problem to a shortfall of USD, claiming that CBM’s cash limits are unrealistic in the current market. Experts have been vocal about the threat of inflation for months, meeting with CBM on several occasions to propose alternatives that would lessen the impacts on average consumers.
The kyat has continued a steady decline since it was floated at 818 to the dollar in 2012, prior to which the government had set the official exchange rate at 6.4 kyats to the US dollar.
Some experts have attributed the drop to a growing trade deficit, which reached $4.9 billion during the last fiscal year.
Tony Picon, chairman of the British Chambers of Commerce in Myanmar, told The Irrawaddy that while the issue needs careful consideration by policy makers, it is not uncommon in developing countries and does not indicate an immediate threat to the domestic economy.
“Usually as a country develops it needs more imports of capital equipment than exports. This causes balance of trade issues which in turn weakens the local currency,” Picon said. “This in no way means the economy is breaking down, just issues that should be carefully addressed.”