Myanmar’s currency, the kyat, continued its rapid depreciation, hitting record lows against the dollar and other major currencies in August. The Central Bank of Myanmar changed its foreign currency reference rate from 1,850 kyats to 2,100 kyats on Aug. 5 as money lenders’ dollar market prices surged to 2,600 kyats. The country’s currency has been under pressure due to the unfavorable economic environment caused by Covid-19, unfavorable decisions by the military junta and global economic issues including supply chain issues and inflation…
Myanmar’s currency, the kyat, continued its rapid depreciation, hitting record lows against the dollar and other major currencies in August.
The Central Bank of Myanmar changed its foreign currency reference rate from 1,850 kyats to 2,100 kyats on Aug. 5 as money lenders’ dollar market prices surged to 2,600 kyats.
The country’s currency has been under pressure due to the unfavorable economic environment caused by Covid-19, unfavorable decisions by the military government, and global economic issues such as supply chain issues and inflation affecting Myanmar’s foreign trade.
The unofficial street rate has since surged to 3,400 kyats per dollar, local reports said.
The current exchange rate is a far cry from the 818 kyat-to-dollar reference rate imposed in 2021 under a managed floating currency regime as part of economic reforms under the country’s former civilian government.
Dollar exchange rate could rise to 5,000 kyats
According to reports, the country’s recent currency regulatory changes, reduced foreign currency supply and rising interest rates in the region have led traders to estimate that the kyat could trade as high as 5,000 against the dollar.
They added that Burmese were increasingly choosing to trade cash for stronger currencies and gold or hard assets such as real estate and cars.
In addition to the new reference rate, the Central Bank of Myanmar has also issued a directive requiring exporting companies to convert 65 percent of their foreign currency holdings into kyat. These companies have 30 days to use the remaining foreign currency to purchase imported goods or make other cross-border payments.
The central bank warned that authorities could take legal action against companies that do not comply with the measures.
Cross-border trade is affected
The government is implementing policies to encourage exporters to do business through legal channels. However, the new exchange rate has disrupted cross-border trade as some traders, including those on the Myanmar-Thailand border, stopped importing due to losses. Online stores that rely on cross-border trade have also stopped selling goods.
