The Central Bank of Myanmar has announced exemptions for foreign entities from a controversial new policy that would require all foreign exchange held at the bank or earned from operations to be converted into local currency. The rule, introduced just two weeks ago, has drawn widespread condemnation from business groups and residents. The exemptions include approved foreign investment companies, companies in special economic zones, international NGOs, diplomats, United Nations agencies and airlines, government officials backed by the junta said on April 21. Strengthening control over foreign exchange flows…
The Central Bank of Myanmar has announced exemptions for foreign entities from a controversial new policy that would require all foreign exchange held at the bank or earned from operations to be converted into local currency.
the old rules introduced Just two weeks ago, it drew widespread condemnation from business groups and residents.
The exemptions include approved foreign investment companies, companies in special economic zones, international NGOs, diplomats, United Nations agencies and airlines, government officials backed by the junta said on April 21.
The regulation was initially implemented to better control the flow of foreign currency in countries that were struggling with international sanctions and foreign currency outflows. This comes amid an ongoing conflict that has led to instability and policy uncertainty following a military coup in February 2021 and sparked a massive exodus of foreign companies.
Businesses warn of ‘serious impact’
Industry groups and embassies have warned that if regulation is maintained, business activity in the country could be severely affected – in addition to the adverse effects and outright dislocation that the coup has already brought to many sectors of the economy.
Myanmar’s foreign chambers of commerce warned in a joint statement that the new currency rules will create “insurmountable challenges” for businesses and will disconnect the country from the global financial system.
Now, the change will provide some relief to fuel importers who were initially hit hard by the exchange requirements. However, as the Central Bank of Myanmar only refers to “foreign entities”, it is unclear what applies to purely domestic businesses that earn foreign currency through exports.
‘We don’t want investments to be withdrawn’
Aung Nai Ou, Minister of Investments and Foreign Economic Relations of the military junta, said the currency exchange measures were initially aimed at stabilizing the country’s non-convertible currency, the kyat, which has been in free fall since the coup.
But he acknowledged that the country is in a “transition period”, especially economically, and foreign companies “will not have any additional burdens”.
“Myanmar is committed to providing a safe, convenient and favorable investment environment. We do not want to see investment withdraw,” he said.
