Military council abandons fixed foreign currency exchange rates

Nearly three years after Myanmar’s junta overthrew an elected civilian government, it has issued a directive declaring that it will no longer set and maintain fixed exchange rates for foreign currencies. On Tuesday, the regime-controlled Central Bank of Myanmar (CBM) notified banks licensed to trade foreign currencies that they would no longer set the exchange rate for them, so the banks would be permitted to trade foreign currency according to market prices. CBM spokesperson director general Aung Aung confirmed to Myanmar Now on Wednesday that the directive that has been circulating on social media since Tuesday night is genuine. A local businessman described the junta's decision to abandon fixed US dollar rates as akin to relinquishing control over the trajectory of foreign exchange. The current market exchange rate is around 3,500 kyat per dollar, whereas the rate set by authorities was around 2,100 kyat, even as market rates regularly hovered around 3,000. "They have nothing to sell, so they are just telling people to buy and sell dollars at the prices they like,” he explained. “They know the mechanism is already broken. It can’t recover, so they just let go of control.” After the February 2021 coup, Myanmar’s financial market was in chaos, with the kyat suffering from heavy inflation, depreciating by around 50 percent. Prices of fuel, basic commodities and gold—a major savings asset for the public—soared. While it is not known how much currency the CBM exchanged in total during this period, more than US$120m was sold during the first six months after the attempted seizure of power. Sanctions led by the US and European Union targeting the oil and gas industries and state-owned banks have severely curtailed the flow of dollars to the junta, prompting the regime to adopt a series of measures to control the currency. The regime has also imposed a requirement on sailors, migrant workers abroad, businesses involved in cross-border commerce, and others receiving income denominated in American dollars to exchange their earnings at the junta’s rate. To replenish its dwindling reserves, the junta mandated that exporters exchange their export earnings within 24 hours for kyat. Some business people failed to comply with this mandate, and the junta revealed it would take action against such individuals. Among those implicated in exploiting the trade in dollars have been some of the regime’s top generals. Australian economist Sean Turnell, who was formerly imprisoned in Myanmar, explained that the regime’s inability to sell dollars at their fixed exchange rate to its own supporters was a “sign that the end is near” for the junta. He pointed out that fuel companies in particular require US dollars to purchase petrol that supplies the military council, which uses jet fuel to carry out airstrikes against resistance groups and civilian populations nationwide. “This is telling us that they’re running out of foreign exchange and they just need to go straight to the market,” Turnell told Myanmar Now “These things typically happen [...] when regimes are really under the hammer.” “This regime’s in real trouble,” he added. The junta has been subsidising the petrol and diesel market by selling US dollars to local fuel importers at a rate at least 1,000 kyat lower than those on the black market to ensure a sufficient supply. Starting this month, the scheme will only be continued for diesel companies, Myanmar Now has learned. In response, several petrol stations in Yangon and Naypyitaw shut down this week, with long lines of cars and motorbikes seen waiting to refuel. People in Naypyitaw queue for fuel at a petrol station (Myanmar Now) Junta chief Min Aung Hlaing was quoted in regime-controlled media saying in a Monday speech that increased exports were required to boost foreign currency reserves. He commended favourable shifts in bilateral trade with neighbouring countries like China, Thailand and India, which use their own currencies to buy Myanmar goods. He has repeatedly blamed opposition groups—and not his own military’s illegitimate rule—for disrupting the foreign currency market, the banking industry, and the country’s economy.

Military council abandons fixed foreign currency exchange rates

A leaked directive from the regime’s Central Bank of Myanmar instructs banks to trade foreign currency at market prices for the first time since the 2021 coup

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