Myanmar junta introduces new kyat-rupee exchange mechanism for trade with India

Myanmar’s junta-controlled embassy in New Delhi announced on Tuesday that a newly adopted procedure for direct currency exchange between Myanmar and India had gone into effect to facilitate bilateral trade. According to the embassy’s statement, the Punjab National Bank in Yangon, which has the military’s approval for direct payments in Myanmar, had cleared transactions for more than 10 million rupees’ worth of pulse exports to India using the mechanism. At the rate of 25 kyat per rupee set by the Myanmar military regime, 10 million rupees is equivalent to 250 million kyat. “We would like to urge business owners on both sides of commercial transactions to use this transactional process to their mutual benefit,” the statement said. The junta-run Central Bank of Myanmar has authorised only some financial institutions to conduct the rupee-kyat transactions, including India’s Punjab National Bank and Myanmar’s UAB Bank and CB Bank. The embassy statement said that users would also have to open a “Special Rupee Vostro Account” (SRVA) at Punjab National Bank to take advantage of the exchange method. The mechanism requires Myanmar import and export businesses to be the holders of the SRVAs opened at Myanmar banks, and allows for rupee-denominated export revenues from India to be used for further imports of Indian goods or transactions with other businesses using the direct exchange. American dollars are still the most widely used currency for foreign trade by Myanmar-based businesses. Than Than Swe, chair of the Central Bank of Myanmar, claimed that the new direct rupee-kyat payment system would reduce Myanmar’s dependence on US dollars, facilitate the procurement of medicine and other vital imports, and streamline the traffic in goods between India and Myanmar. Traders have responded with scepticism. A Mandalay-based trader who spoke to Myanmar Now predicted that few people would use the new mechanism, pointing to its exclusive availability through the Punjab National Bank and the need for merchants and traders from each country to build mutual interpersonal trust with their counterparts for bilateral trade to thrive. “It won’t be so easy to implement the new system as everyone is used to dealing with dollars,” he said. “It’s hard to adjust to such a drastic change in the payment system in such a short time. Under the circumstances, it’s impossible to stop using the dollar completely now. It just cannot happen.” “Even some Chinese companies do not accept payment with the Chinese yuan, only US dollars,” he continued. “It’s the same in India.” A border trader noted the sharp decrease in commerce on the India-Myanmar border due to the recent intensification of armed resistance against the military, and predicted the new mechanism would only remain in effect on paper. Some Myanmar merchants have stopped trading at the border altogether due to the escalating conflicts as well as the increase in destructive, deadly junta airstrikes in Sagaing Region and Chin State, which share borders with India. Facing economic challenges such as the volatility of the kyat and slow recovery from the Covid-19 pandemic and post-coup contraction, the junta has responded erratically, cracking down arbitrarily on holders of American dollars and business owners accused of “speculation” and price gouging. The new kyat-rupee exchange mechanism is not the first attempt to circumvent the scarcity of dollars by the junta, which has previously required that traders use only local currencies such as Thai baht and Chinese yuan to pay for imports at the borders.

Myanmar junta introduces new kyat-rupee exchange mechanism for trade with India

Facing challenges arising from insufficient American dollar reserves, the junta has authorised a new method for traders to exchange kyat directly for rupees in their transactions with their Indian counterparts

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