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Depreciating currency adversely impacts Myanmar economy

Myanmar’s currency kyat has been witnessing a constant fall against the US dollar, which is making a negative impact not only on the country’s domestic market but even export oriented businesses. The currency has fallen by more than 25 per cent against to the dollar this year to 1,300 kyat on Tuesday this week, its weakest. In the unofficial market, the rate reached up to 1,315 kyat.

The players have called for immediate measures to control further fall. Since the US dollar prices are rising, traders are not able to import as much quantities they ordered before, leading to rise in the local prices. Experts point out that the Ministry of Commerce, the central bank, Myanmar Investment Commission and the Ministry of Finance have to take instant action to tackle this issue.

While weakening of kyat against the dollar should help exporters like farmers, since the country depends upon imports of farming machinery and fertilisers, they are not able to benefit. Export volumes were already impacted by the nationwide flooding earlier this year. Since most of the raw material required is imported, Myanmar is not able to control the production cost resulting in the rise of final product price. The only materials produced domestically are cotton balls and high-density poly- ethylene bags, which are also made from imported materials.

In late June, the Central Bank of Myanmar increased the volume of US dollars it sells to the market in its daily auctions. A new reserve requirement ratio is expected to be implemented in local banks by January. The central bank is also working with organisations including the International Monetary Fund, the World Bank, the Asian Development Bank and the Japan International Cooperation Agency to find a way out.

 
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