The junta’s recent reshuffle of the Central Bank of Myanmar (CBM)’s leadership seems unlikely to improve the country’s battered financial sector, which is reeling as a result of numerous missteps by the bank that have only aggravated the problems facing businesspeople amid the downward economic spiral sparked by last year’s military coup.
In a shakeup this month, CBM governor U Than Nyein and vice-governor U Win Thaw lost their jobs, while vice-governor Daw Than Than Swe was promoted to governor. Daw Than Than Swe was shot in April by anti-coup resistance fighters at her house in Yangon’s Bahan Township.
Newly retired Major General Zaw Myint Naing was named as one of the bank’s three vice-governors. He was serving as a director of the Accounts Department at the Ministry of Defense when he was ordered to retire from the Myanmar military to join the CBM.
The value of the Myanmar currency, the kyat (MMK), has declined since the military takeover. Faced with a shortage of foreign currency, the regime has exerted greater control over the CBM since April in an effort to try to shore up the deteriorating financial situation. It has imposed various measures including restrictions on foreign exchange rates and several monetary regulatory changes. The recent CBM reshuffle is believed to be an effort to cool inflation.
However, since the shakeup, the value of the MMK against the US dollar has decreased on a daily basis. Despite the regime setting the official MMK-USD exchange rate at 2,100 per dollar, it hit a record low of 4,200 in unofficial trading on Wednesday, compared to around 2,050 in April.
The daily devaluation of the local currency is a big blow for import-dependent Myanmar, prompting serious hardships for the public, who are now facing fuel shortages as well as skyrocketing commodity prices.
On Wednesday, the CBM said without elaboration that it would “provide more than US$200 million through the foreign exchange market” to cool down the increasing prices caused by fuel shortages.
Banking experts and businesspeople cast doubt on the new CBM leadership. Some who know new Governor Daw Than Than Swe said she has neither the ability nor the expertise to lead such an important body in addressing the current challenges.
“She will just become another puppet [like her predecessor] who will say ‘yes’ to everything the junta orders her to do,” said a former chief operations officer of one of the country’s biggest private banks.
Prior to the appointment of ex-Maj-Gen Zaw Myint Naing as one of the CBM’s vice-governors, the regime transferred six lieutenant colonels to the CBM as deputy directors.
A banking expert at the CBM told The Irrawaddy on condition of anonymity that placing former military officers in important roles at the central bank is another way for the military council to take full control of the whole system.
“Throughout the history of the age of dictators in Myanmar, the military has always made the mistake of thinking that it can address all issues in different sectors,” he said, referring to the successive military regimes that ruled the country from 1962 to 1988 and from 1988 to 2011.
Following the coup in 1962, Myanmar, once the most developed economy in Southeast Asia, began a steady decline due to the generals’ mismanagement. In 1987, it was listed as a Least Developed Country (LCD).
“During the decades of military rule in the past, it proved that the military’s actions didn’t work at all, since they were not the right men in the right place,” said the former CBM official.
At the same time, businesspeople say they are facing ever greater difficulty in doing business, with the CBM’s frequent policy changes being one of the key factors in the crisis.
Whenever the CBM makes a policy change, they say, the business community must adjust to the new rule. Just as they are getting accustomed to the first instruction or policy, the CBM announces a new instruction or policy, creating fresh hardships for businesses, which have to think of another way to cope with it.
In April, the CBM seized foreign currencies in the country, ordering that foreign exchange earned by locals be converted into the MMK at the official rate of 1,850 kyats within one working day. At the time, the rate was around 2,050 in the market, so exporters and foreign currency account holders were hurt by the new policy.
On Aug. 7, the CBM increased its fixed exchange rate to 2,100 kyats. However, this led to an increase in the prices of fuel that Myanmar has to import. Meanwhile, the prices of all necessities, goods, commodities, medicines and all the other things the people need in their everyday lives have gone up too.
“It would be helpful if they could at least keep their policies stable. Then, perhaps we could find ways of coping with the new rules. Otherwise, things just get worse,” said real estate businessman U Tun Tun, using a pseudonym for security reasons.
Ma Zar Zar is a logistics start-up owner in Yangon. Her company was established in 2019, and her clients are exporters and importers.
However, since the CBM announced the fixed foreign-exchange rate in April and ordered the conversion of foreign-exchange earnings at the official rate, most of her clients have gone out of business, as the previous export-import deals they made were lost. The price difference between the official and market rates hurt them badly.
“Even last year, business was very slow, but we were able to move forward bit by bit. But this year, we are simply losing ground. Now, most businesses like ours are going into survival mode,” said Ma Zar Zar.
When asked what he thought of the CBM’s management of the country’s financial sector so far, the central bank official said: “If we look into the chaotic current situation of the financial sector, it is apparent that the instructions and policies of the junta’s CBM are not really working.”