Myanmar garment makers forced to exchange export earnings at junta-imposed rate

State-owned and private banks in Myanmar are now taking all US dollars earned from the country’s garment export industry at fixed exchange rates imposed by the regime, according to garment business owners. Until recently, businesses could exchange 75 percent of their export earnings at actual market rates, while the Central Bank of Myanmar took 25 percent at a forced fixed rate of 2,100 kyat per dollar. Now, however, garment business owners report that the rates being imposed by banks are lower than the actual external market rates. A garment businessman from Yangon told Myanmar Now that in recent months, banks have been taking 75 percent of the foreign export earnings from garment businesses at rates ranging from 3,500 to 3,560 kyat per dollar, while the actual market rate is around 4,500 kyat per dollar. “Our garment industry’s foreign currency comes in legally. When they take it at their fixed rates, it creates difficulties for business owners. When we need dollars for payments, we can’t buy them at the official rates,” he explained.This situation forces garment business owners to accept lower rates for their dollars, while also having to purchase dollars at the higher external market rates when needed for operations.While some raw material purchases can be negotiated in kyat, smaller garment factories will face greater challenges, according to a businessman from Yangon’s Hlaing Tharyar Township. “This will cause problems for businesses that handle both garment production and other import-export activities,” he said.For example, his factory’s export earnings for October were exchanged by a private bank at a rate of 3,600 kyat per dollar.Business owners argue that the junta’s control over export earnings is adding another burden to Myanmar’s garment industry, which is already struggling with irregular electricity supply, labour shortages, and declining foreign orders. The junta’s control over foreign currency exports began with rice and broken rice exports through border trade routes. Since the coup, the junta has faced a foreign reserve crisis due to economic decline, lack of foreign investment, and Western sanctions.Further complicating the situation, the junta has lost control of most Myanmar-China border trade gates—a key route for Myanmar exports—since allied ethnic armed groups launched their Operation 1027 offensive in northern Shan State last year.Currently, the junta’s foreign currency sources are limited to oil and natural gas sales to China and Thailand, as well as garment exports. In the 2022-2023 fiscal year, garment exports totalled US$5.3 billion, compared to $3.6 billion in the 2020-2021 fiscal year, according to figures from the junta’s Ministry of Commerce.To control foreign currency sources, the junta initiated a scheme in April 2022 requiring all export earnings to be converted into kyat within one day. Initially, 100 percent of export earnings had to be exchanged at the Central Bank’’s fixed rate of 1,850 kyat per dollar. By August 2022, this was adjusted to 65 percent of the earnings at 2,100 kyat per dollar. In July 2023, the amount that had to be exchanged at an artificially low rate was reduced to 50 percent, and by December 2023, it was further reduced to 35 percent. Most recently, in August 2024, the requirement was lowered to 25 percent. In addition to controlling export earnings, the junta has also been restricting import licences to limit foreign currency outflows.

Myanmar garment makers forced to exchange export earnings at junta-imposed rate

Garment exporters are squeezed by forced currency exchanges at below-market rates, adding to the industry’s ongoing challenges

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