Rakhine State’s banking system has collapsed amid power outages, fuel shortages, and internet disruptions during a year-long conflict that has seen the military regime suffer significant loss of territory to the Arakan Army (AA).
Residents report that the local economy has shrunk to the point where people now make transactions only for survival.
Since fighting resumed on November 13, 2023, banks in towns such as Sittwe, Maungdaw, Thandwe, and Minbya have ceased operations. In mid-November, the last remaining private banks shut down in Kyaukphyu, including KBZ, CB, AGD, Ayeyarwady, Yoma, and Global Treasure Banks.
KBZ, a major private bank with 13 branches in Rakhine, hung on in Kyaukphyu, Ngapali, Thandwe and Taungup until June.
All private banks have ceased operations in Rakhine’s capital, Sittwe. The junta-controlled Myanmar Economic Bank (MEB) shut down there in March.
Although the MEB branch is still open in Kyaukphyu, it only operates to pay salaries for junta employees and no longer provides other banking services, according to locals.
Transfer, withdrawal fees spike
With the closure of banks, locals now have to pay higher fees of 15 to 20 percent to withdraw and transfer money through mobile banking services like KBZ Pay, Wave Pay, and Mytel Pay.
A local businessman in Rakhine State told The Irrawaddy: “The private banks have closed in Kyaukphyu. The banking system has collapsed across the whole of Rakhine State, including Sittwe. Making transactions has become difficult. Money transfer fees are high and fluctuating.”
Locals are also reporting cash shortages after the regime blockaded roads and waterways to Rakhine.
Meanwhile, migrant workers are facing difficulties remitting money back home to Rakhine, while business transactions have been disrupted and fraud has increased, according to merchants and residents.
“There are clashes everywhere, and the closure of banks has made it hard to transfer money,” a business owner in Sittwe said. “People outside face pressure and challenges in transferring money here. It has become increasingly difficult to do business.”
Black market rising
Rakhine mainly relies on the agriculture, fisheries, livestock, border trade, and tourism sectors. However, the economy has collapsed amid the conflict, banking suspension, and relocation of major businesses, said the business owner.
The junta has also restricted supplies of cash, fuel, medicine, and food to Rakhine State, only allowing limited shipments to Sittwe by sea. Commodity prices have skyrocketed as a result, inflicting more hardship on residents.
“In the past decade, private financial services, especially banks, have become indispensable to the national economy,” a Myanmar economist noted. “The same applies to Rakhine. A good banking service will boost the economy while a weak one will drag it down. An economy suffers severely when its banking system collapses.”
The banking collapse and shortages have sparked a booming black market, with smuggling becoming widespread, the expert added.
Skyrocketing commodity prices
A merchant from Taungup said: “The local economy is struggling to operate. The regime blocks goods transportation to Rakhine. Merchants are trying to supply the market one way or another, but commodity prices have soared.”
The price of basic foods has surged almost ten-fold since fighting resumed a year ago, according to locals.
Another Rakhine business owner said: “People reliant on daily wages can’t find work. Business owners have left Rakhine, so no one is providing jobs for daily laborers. The economy has shrunk to where businesses are only just surviving.”
As major companies suspend operations in the face of ongoing armed conflict, the state’s socio-economic foundations are falling apart. However, local support for the Arakan Army and its goal of autonomy for Rakhine State appears to remain strong.
A Rakhine resident told The Irrawaddy: “We are enduring the impacts of the revolution in the hope of seeing change.”
Imminent famine
The conflict in Rakhine, coupled with the aftermath of Cyclone Mocha and the blockade of humanitarian aid, is pushing the local population toward starvation, according to a Nov. 7 report issued by the United Nations Development Program (UNDP).
Titled “Rakhine: A Famine in the Making”, the report states that major sectors like trade, agriculture, and construction have ceased functioning, and export-oriented and agro-based livelihoods are disappearing as markets become inaccessible due to blockades.
It warned that more than two million people in Rakhine could face starvation by mid-2025.
In a statement marking one year of fighting, the AA acknowledged the hardships faced by residents of towns it controls and vowed to address them while continuing its efforts to liberate the whole of Rakhine State.
