YANGON: Myanmar’s currency has plunged more than 7% over the past month to the lowest since it was floated last year, raising concern about economic stability in Asia’s newest democracy.
The drop coincides with a construction boom in Myanmar’s commercial capital, Yangon, which is fuelling demand for dollars as builders import equipment and materials, part of a scramble by investors to tap one of the world’s last frontier markets after an easing of sanctions by Western countries.
Money changers such as Kyaw Naing say people are hoarding dollars, expecting further rises, in the first major bout of currency speculation since Myanmar emerged from military rule in March 2011 and introduced political and economic reforms.
“We are getting fewer customers now because people don’t want to sell their dollars, because they know the value will rise even higher,” Kyaw Naing said, holding a fistful of the kyat currency in his hole-in-the-wall stall in Yangon.
The sliding kyat is welcome relief for rice farmers and other exporters but has prompted concern over the stability of Myanmar’s tiny, long-isolated economy, posing one of the biggest challenges yet for policy makers who introduced a managed float of the currency in April 2012.
“It’s quite clear that the plunging kyat has already had a strong impact on the import industry and it will affect consumers,” said a senior official from the Ministry of Commerce, noting Myanmar’s average April-May import bill of US$30mil a day was about 17% higher than last year.
A disastrous “Burmese Way to Socialism” introduced after a 1962 coup followed by sweeping nationalisation and decades of military mismanagement have left Myanmar heavily dependent on imports for basic needs, from edible oils to condensed milk and medicine, official data shows.
“The plunging kyat has had a strong negative impact on importers of all goods medicines, electronic appliances, computers, edible oil, diesel, you name it,” said Soe Tun, a director of several businesses including Farmer, the country’s biggest car showroom.
Western academics and economists advising the government, however, say the currency has been overvalued and needs to fall to help farmers, the vast majority of whom have yet to benefit from the country’s reforms. – Reuters