Myanmar’s new banking rule forces conversion of foreign currencies into Kyat
Myanmar’s Central Bank has announced that all foreign currency accounts held in the country’s banks must be exchanged to the Kyat within one working day, and all foreign currency earned by locals must be exchanged for local currency.
The order, dated April 3rd, stated that those who fail to comply will be charged under the Foreign Exchange Management Law. The notice did, however, state that exemptions will be announced later.
Ever since last year’s overthrow of the civilian government by the military, Myanmar’s economy has been suffering.
There were cash shortages, sharp increases in the prices of commodities and the plummeting value of the Myanmar Kyat.
The Central Bank also used methods of accepting foreign currencies, such as the Yuan and the Baht, for border trade transactions and tethered the rate of the Kyat to a rigid reference rate.
While the official rates range around 1,750-1,850 MMK per US dollar, black market rates are going for around 2,100. Private banks, which provide services requiring the use of the dollar, also do not strictly adhere to the rate set by the Central Bank.
According to Mr. S, an expert in the financial sector, this is going to put a huge burden on the middle class, a demographic that, he claims, will leave the country slowly but surely.
“It was slowly getting to this point, but if things are this restricted, this is going to be a huge hit. This is lighting a fuse for a huge change that will happen in maybe two years.”
“We may start seeing the adverse effects in as soon as three months,” he said.
Many people online question the rationale behind such a rushed decision and lack of detail on whether Foreign Currency accounts, forcibly changed to the Kyat, can be accessed or not, as there are still restrictions placed on withdrawals from different types of banking accounts.
Mr. Z, a businessman, said that he is wary of such moves and, thus, is now prepared for them.
“Any and all payments, to source my materials, go through my Thai bank account. So it is not a problem for me, so long as I can transfer to my Thai account,” he said.
There has yet to be a follow up statement to the exchange order or any representative of the Central Bank officially speaking to the news media regarding this decision.