The Central Bank of Myanmar (CBM) has denied rumors that it will print additional money to fund the budget deficit of the so-called caretaker government formed by the military regime.
The junta has been running a budget deficit for more than six months as a result of people boycotting payments of any kind to the regime, including paying taxes and utility bills, since the military’s February 1 coup. Last week, coup leader Senior General Min Aung Hlaing admitted that the regime has been receiving less tax revenue and urged ministries and organizations to be thrifty with their expenditures.
His statement has fueled rumors that the regime might print additional money to fund the deficit, prompting concerns about further inflation.
“We have no plan to print money. It is just a rumor,” the Vice-Governor of the CBM, U Win Thaw, told The Irrawaddy. As the economy is slowing, the regime has been cutting expenditure, he added.
“If necessary, we will have to print [additional money] to maintain a proper balance. But it is not sensible to print money whenever there is a deficit,” said U Win Thaw.
The gold price is continuing to appreciate and the Myanmar currency, the kyat, has further weakened against the US dollar amid rumors of the CBM printing more money in the near future.
US dollars are in high demand in Myanmar, with exports declining and imports of pharmaceuticals, including medical oxygen and supplements, surging because of the ongoing third wave of COVID-19 that began in June.
The country’s foreign exchange hit a record low of around 1,800 kyats to the dollar in the open market on Monday, while the domestic gold price reached a new record of nearly 1.7 million kyats per tical.
On Tuesday, the market exchange rate fell to around 1,660 kyats per US dollar after junta police, acting on the CBM’s instructions, arrested currency dealers selling US dollars at higher rates.
By Wednesday morning, the exchange rate was around 1,760 kyats to a dollar in the open market and the gold price had dropped back to 1.64 million kyats per tical.
“The CBM will sell US dollars next week for importers of pharmaceuticals, oxygen, edible oil and fuel,” said the CBM Vice-Governor.
Gold prices dropped to normal at around 1.65 million kyats per tical after dollar prices fell, the Yangon Region Gold Entrepreneurs Association Chairman, U Myo Myint, told The Irrawaddy.
The steady depreciation of the kyat since the coup, coupled with the regime’s restrictions on cash withdrawals from private banks, has prompted public distrust in the national currency. As a result, the demand for US dollars and gold increases when rumors spread.
Myanmar’s currency has lost 23 percent of its value since the Feb. 1 coup, forcing the CBM to sell over US$100 million over the past six months.
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