Myanmar's Junta Powerless as Currency Drops 60% in Four weeks, Economy Tanks

People line up outside a bank to withdraw cash, in Yangon, Myanmar May 13, 2021. REUTERS/Stringer

Myanmar’s currency has lost more than 60% of its value since the beginning of September, which has pushed up the prices of food and fuel in an economy since a military coup eight months ago.

“This will upset generals because they are heavily influenced by the kayat rate as a broader barometer of the economy, and therefore a reflection on them,” said Richard Horsey, Myanmar expert at the International Crisis Group.

In August, Myanmar’s Central Bank tried to tie the kayat 0.8% on either side of its reference rate against the dollar, but abandoned it on September 10 as pressure on the exchange rate increased.

The dollar shortage has become so severe that some currency changers have downed their shutters.

“Due to currency price volatility at this time … all North Breeze Exchange service branches are temporarily closed,” the currency converter said on Facebook.

Those still working were bidding for 2,700 kilos per dollar on Tuesday, compared to 1,695 on 1 September and 1,395 on 1 February when the military led by Nobel laureate Aung San Suu Kyi. The democratically elected government was overthrown.

In a report published on Monday, the World Bank predicted the economy would shrink by 18% this year, partly due to the pandemic, and said Myanmar would see the biggest contraction in employment in the sector and in the country’s poor. will increase. .

Mounting economic pressures come amid signs of escalating bloodshed, as armed militias become daring in clashes with the military after months of protests and strikes by opponents of the junta.

“The worse the political situation, the worse the currency rate,” a senior official of a Myanmar bank said on condition of anonymity.

Myanmar is also struggling to deal with a second wave of coronavirus cases, which began in June, when the response of the authorities was crippled after several health workers joined the protests. Reported cases have risen above their high, although the exact extent of the outbreak is unclear.

Stay-at-home orders have been withdrawn in some townships, but are still in effect in some areas.

Soon after the February 1 coup, many people lined up to withdraw savings from banks and some bought gold, but a Yangon jeweler said many desperate people are now trying to sell their gold back.

The central bank gave no reason for abandoning its managed float strategy earlier this month, but analysts believe its forex reserves should be seriously depleted.

Central bank officials did not respond to calls on how much foreign exchange was left, but World Bank data showed it had reserves of just $7.67 billion at the end of 2020.

Even after coming out of its managed float, the central bank spent $65 million between September 13-27, buying the kayat at a rate of 1,750 to 1,755 per dollar.

The bank’s executive said the central bank’s efforts have had limited impact in the off-confidence money market.

The economic crisis has driven up the price of staples, and the United Nations Office for the Coordination of Humanitarian Affairs said this week that nearly three million people now need humanitarian aid in Myanmar, up from a million before the coup.

48 kg of rice has cost 48,000 kyt, which is about 40% since the coup, while gasoline prices have nearly doubled to 1,445 kg per litre.

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