Since Burma’s democratic handover of power on April 1, the country has seen a resurgence in the value of the kyat, observers say.

Not even a week after a National League for Democracy (NLD)-led government took office, the Central Bank of Myanmar on April 7 reported an exchange rate of 1,192 kyats per US dollar, an improvement from the rate of 1,310 kyats per dollar earlier this year.

“The kyat value is a little bit higher because many international investors are looking to invest here [in Burma], so some FDI [foreign direct investment] is coming, the supply of dollars is growing, and the US dollar has decreased in value,” said Maung Aung, a senior economist at the Ministry of Commerce.

Yet this is also a critical observation period for foreign investors, who are keeping a watch on what Burma’s heralded transition might mean for businesses in the months ahead.

“This is a wait-and-see period, so [foreign] demand is also lower,” Myat Thin Aung, chairman of Rangoon’s Hlaing Tharyar Industrial Zone, told The Irrawaddy.

“Exporters won’t immediately benefit from this situation because they won’t earn as much from the shifting exchange rate. However, this will be good for importers, since they can sell more products at lower prices, and it will be good for consumers, too,” he added.

Both Maung Aung and Myat Thin Aung predict that the kyat exchange rate will stabilize between 1,000 and 1,100 kyats per dollar.

“The kyat value shouldn’t fall below 1,000 kyats per dollar, or else exporters will be seriously disadvantaged. The government needs to control the exchange rate very carefully,” Maung Aung said.

Burma’s main exports are agriculture-based products, including rice, beans, corn and rubber, as well as wood products, timber, jade and oil and gas.

The exchange rate reached a new high—1,307 kyats against the greenback, with black market traders offering 1,315 kyats per dollar—in December, when a new and controversial car import policy was announced. This was the highest rate since the aftermath of the 2007 Saffron Revolution, when the black market was offering around 1,400 kyats on the dollar.

Source:
courtesy of THE IRRAWADDY

by Kyaw Hsu Mo

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