Myanmar’s Currency Hits Record Low as Coup Wreaks Havoc on Economy
By The Irrawaddy 29 September 2021
Almost eight months after the military coup, Myanmar’s currency depreciated to a record low this week, prompting fears of worsening social and economic instability in the country, which has been devastated by the takeover.
On Tuesday, the US dollar exchange rate rose to a record high of around 2,500 to
2,700 kyats per dollar. Prior to the Feb. 1 coup, the exchange rate was between 1,300-
1,400 kyats per USD. The rates on Wednesday are the same as yesterday, according to sources from different money exchanges and the black market.
The value of gold on the domestic market reached a record high of more than 2.25
million kyats per tical on Tuesday, up sharply from a little over 2 million kyats the
previous day. Gold shops had to close on that day and the market reopened only on Wednesday afternoon with prices at 2.2 million kyat per tical. The tical is a traditional Burmese measurement of gold weight equal to16.33 grams (just over half an ounce). The gold price before the coup was 1.32 million kyats per tical.
People are only looking to buy US dollars in the currency market, with almost no one willing to resell, pushing the value of the greenback up sharply against the local currency, according to market sources.
“Dollar sales are almost nonexistent and demand [for US currency] is rising as more people want to buy than previously,” said a businessman who spoke on condition of anonymity.
Under the junta, the Central Bank of Myanmar has been selling reserve dollars to some companies importing key commodities such as petrol, cooking oil and pharmaceuticals through local private banks on a quota basis. However, the businessman said, there is a large demand for dollars in the market.
Since the coup, the central bank has sold more than 190 million US dollars to the market in an attempt to stabilize the exchange rate. Of that amount, some $60 million was sold in September alone.
However, unwilling to accept the drop in the Myanmar currency’s value, the junta set the official exchange rate at around 1,755 kyats per USD on Wednesday.
Economists told The Irrawaddy that the economic slowdown, the banking crisis and political instability in the aftermath of the coup have led to volatility in the US dollar/kyat exchange rate, adding that the banking crisis had escalated into a currency crisis.
A business analyst in Rangoon said, “It is mainly based on political instability. As the political situation becomes more volatile, some rich people will buy gold and dollars. The Central Bank also tries to monitor [the situation]. But as the bank does not have a lot of dollars, it can’t control things.”
He said the current economic problems in the Southeast Asian country could not be resolved through economic policies alone, but only through political change.
The rise of the US dollar/kyat exchange rate has seen petroleum prices increase steadily to more than 1,400 kyats per liter. At the end of January, fuel prices ranged between 660-770 kyat per liter.
As a consequence, transportation costs have risen, as well as domestic commodity prices and the prices of some imported goods. On Wednesday, some companies abruptly halted their sales of imports due to the serious drop in the kyat’s value.
An economist said: “People have lost faith in the kyat and are reluctant to deposit in banks. So they purchase the commodity they trust. People are trying to save dollars rather than spending.”
He said that due to a decline in exports, the cessation of foreign investment and the absence of international aid, the junta’s income from foreign currency had dried up, limiting its ability to control the US dollar/kyat exchange rate.
“They can’t solve this crisis. It is clear that they cannot do it. The whole economy is collapsing because of them,” he said.
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