Myanmar's central bank (CBM) said foreign exchange earned by locals must be deposited in accounts at licensed banks and exchanged for the domestic kyat currency within one working day.
In a notification dated April 3 and published in state media on Monday (Apr 4), the central bank said it would issue exemptions to the rule separately and that foreign currency transferred abroad should be done though the licensed Foreign Exchange Trading banks.
Foreign currency can only be sent overseas with government approval, it said. It said further details of the rules would follow.
Myanmar’s military leaders are facing a raft of sanctions after they seized power on Feb. 1, 2021, ousting the country’s elected government. The order to hand over foreign exchange suggests the authorities may be running short of hard currency needed to pay debts and purchase key supplies such as oil, gas and weapons.
Hard currency is also needed to repay foreign debt, which for Myanmar stands at about $10-$11 billion.
The central bank order instructed holders of foreign currency accounts in Myanmar to open new accounts to convert funds into kyats (pronounced CHUHTs). People earning foreign currency are supposed to also convert their money into kyats, which are not a convertible currency and are not supposed to be taken out of the country.
The move speaks to the disarray of Myanmar’s economy since the military coup of February 2021, which immediately prompted mass protests, civil disobedience work stoppages, violent crackdowns by the military junta, and disruption to critical services like telecommunications, banking, health, and education.
To this concatenation of challenges has since been added repeated rounds of U.S., British, Canadian, and European Union sanctions designed to punish the junta for its takeover and ensuing violent crackdowns on pro-democracy protests.
The CBM’s move come after a year in which it has sold $553.8 million worth of U.S. dollars in a bid to stem the slide in the value of the kyat.
Western sanctions, particularly those from the U.S., along with the collapse in exports and foreign direct investment, have choked off the amount of U.S. dollars flowing into Myanmar, right at a moment of uncertainty in which many speculators and ordinary citizens have flown to the safety of the U.S. dollar. The result has been steady deflationary pressure on the kyat.
The CBM’s move is a clear attempt to establish its control over the remaining foreign exchange inside Myanmar, in order to prevent capital flight and give it the wherewithal to pay for vital imports.
At the same time, the military administration has announced plans to begin accepting foreign currencies, such as Thai baht, Chinese renminbi, and Indian rupees in crossborder transactions in order to reduce its overall dependence on the dollar.
After the military took power last year, Western governments imposed targeted sanctions on the military, military affiliated companies, officials and their families. Their foreign assets were frozen, at a time when the country had lost a large share of earnings from tourism due to the pandemic.
Myanmar’s foreign reserves stood at nearly $7.8 billion as of December 2020, according to the World Bank.
(with inputs from AP)
