The junta-controlled Central Bank of Myanmar (CBM) plans to form a task force comprising officials from the Bureau of Special Investigation (BSI), an intelligence agency, a security service, and a department under the Ministry of Home Affairs to try to bring the soaring foreign exchange rate and gold prices under control.
Myanmar has been hit by soaring inflation since the military coup in 2021 and the regime’s attempts to cool it down have been in vain. The latest blow came early this month with the junta’s circulation of a new 20,000-kyat banknote, which only worsened the inflation panic among the public. One US dollar is now traded at around 3,900 kyats in the open market, and the price of gold was 3.92 million kyats per 16 grams on Aug. 21.
To counter the situation, the CBM held a meeting in Naypyitaw on Saturday with regime bodies including the BSI and the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) on the foreign currency situation. Following the meeting it revealed its plan to form a task force to scrutinize and investigate businesses that have been manipulating market prices.
“Prices these days are not at reasonable rates and they are intentionally created by some people who are manipulating them for their benefit. Therefore, we will take effective action,” said Than Than Swe, governor of the junta-controlled CBM, at the meeting.
According to the minutes of the meeting, the governor warned Myanmar people not to hoard dollars and other foreign currencies. She said permission is required to hold them, and only up to a maximum of $10,000 or the equivalent amount of other foreign currencies, and only for a maximum of six months.
To avoid hoarding, she said, after six months holders must sell the foreign currencies to specified banks at a fixed rate set by the CBM. For example, the regime’s official exchange rate for the dollar is 2,100 kyats.
The CBM raised the issue of exporters who failed to show bank records declaring their export earnings during the period from 2016 to 2022, saying this was a reason for the worsening exchange rate. It said some businesses failed to produce transaction records for export earnings amounting to up to $2 billion.
General Yan Naing Soe, a joint secretary of the junta’s Central Committee on Ensuring Smooth Flow of Trade and Goods, echoed the CBM governor and warned exporters to clear all export earnings within 45 days.
“The current dollar price is baseless. Don’t be worried about it. It will decrease when the time comes,” he said without offering a specific timeframe.
“We will form a task force to deal with the soaring gold price and exchange rate,” he added.
He said that the regime has filed lawsuits against 78 companies for failing to show bank transaction records of export earnings, adding that the founders of two companies are already in jail. He added that plans are in the works to sue more than 80 additional companies.
One exporter dismissed the CBM’s claims as “nonsense”, describing them as an attempt to blame others for its failure to manage the financial sector properly.
They explained that the $2 billion cited by the CBM is not government revenue, rather it is companies’ private earnings. The companies have already paid the related customs and tax clearance, the exporter said, adding that in the past domestic exporters and overseas importers have always been free to arrange payments as they saw fit.
“The junta’s explanation [of the problem] is total nonsense, and so is dating it back to when the civilian National League for Democracy [NLD] government took power in 2016. It is trying to imply to the public that the NLD government didn’t handle [the economy] well, and it is trying to convince them that the current high foreign exchange rates are a result of that. But it is total nonsense,” said U Thant Zin (not his real name), an export and import businessman.
The CBM ordered exporters to convert 65 percent of export earnings into kyats at a fixed rate—set by the CBM—starting from March, in a move seen as part of the regime’s efforts to take control of foreign currency inflows.
The junta-controlled CBM has repeatedly claimed that foreign exchange rates and gold prices are rising because certain businesses are manipulating them, but economists say the regime is simply trying to cover up for its own failures and economic mismanagement.
Exporters are not the only targets of the CBM: It has made similar accusations against gold traders.
“I’m not saying there aren’t people who manipulate [prices],” said a member of the Federation of Myanmar Gold Entrepreneurs Association (FMGEA), explaining that some people may have bought piles of gold bars while spreading rumors that other assets are no longer safe, hoping to drive up prices and sell later at a profit.
“But we, the gold market players, what we expect is only lower prices. Because people buy gold and jewelry only when the prices are affordable,” he said.
Since the junta-controlled CBM revealed its plan to organize a task force to scrutinize, investigate and take action against market manipulation on Saturday, the foreign exchange rate and gold price have significantly dropped this week. On Friday, the gold price jumped to 3,930,000 kyats per 16 grams, the highest figure ever, while the exchange rate jumped to 3,900 kyats per dollar. But on Tuesday, the gold price decreased to 3,680,000 kyats and the exchange rate fell to 3,650 kyats per dollar. Businesspeople in gold and foreign exchange markets expect to see the prices fall further in the coming weeks.
