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May 28, 2020

Traders: High dollar exchange rate can adversely affect nation’s economy

Myanmar local currency banknotes. Photo: Phoe Khwar

Amidst concerns by entrepreneurs, Myanmar currency against the US dollar exchange rate is weakening in the market, which can adversely affect Myanmar’s economy, businesspersons remarked.
The US dollar exchange rate to Myanmar currency yesterday was Ks1,620, under the floating exchange rate system.
“The appreciating dollar exchange rate hiked up prices of fuel oil, fundamental food items and pharmaceuticals. All key stakeholders involved in the currency market, including government, private banks, the Central Bank of Myanmar and businesspersons should tackle this issue. Some unscrupulous traders manipulating the market with massive buying of cash notes should consider the economy of the country and lives of the people with low-income”, said Dr. Soe Tun, a money changer, who is also chair of Myanmar Automobile Manufacturers and Distributors Association.
In the floating exchange rate regime, traders buying foreign currency in hard cash are more seen than international bank-to-bank transfers or foreign exchange dealing services for large multi national.
“Policies are needed to regulate growing illegal currency market and to persuade them to enter legal market from black market.”, said U Than Lwin, senior advisor at Kanbawza Bank.
The escalating trade war between US and China is a contributing factor to dollar appreciation in the global market. Myanmar is drastically affected from this, as Myanmar’s export volume is lesser than those of neighbouring countries. The country needs to formulate long-term plans to bolster potential export items. Also, small and medium enterprises should be encouraged to support import-substituting businesses. Myanmar should significantly reduce unnecessary import items, according to traders.
“Myanmar has export related plans. However, implementing stages are not that satisfying,” said U Ye Myint Maung, an exporter from Myanmar Food Processors and Exporters Association.
“Current exchange rate is on an unexpected high. Afterall, people are suffering from this. If we cannot deal with this, it will get worse”, said Daw Toe Nanda Tin, vice chair of Myanmar Fishery Processors and Exporters Association.
Despite dollar appreciation, exporters do not reap a great profit as they have to buy raw materials at current exchange rate. Traders are expecting a dollar price stability for their businesses to run well. They are concerned over devaluations in local currency.
The dollar exchange rate in the first quarter of this year was around Ks1,300-1,400.
The rate increased above Ks1,500 in mid-August. It hit a record high of Ks1,620 on 19 September. Last fiscal year’s highest record was only Ks1,380.
From 1 April to 7 September of mini-budget period, trade deficit is registered at US$1.33 billion, which is down form $2.1 billion in the similar period of last FY 2017-2018. Trade deficit can be narrowed down against last FY. Also, the export income is up by $1.5 million, according to data released by the Ministry of Commerce.
The Central Bank of Myanmar (CBM), the Ministry of Commerce, the Ministry of Planning and Finance are jointly conducting weekly discussions to regulate the dollar exchange rate. The CBM has also sold dollars to private
banks. At present, the US is planing increase retaliatory tariffs on China’s imported goods next week, which has also led to dollar instability in domestic market, besides money manipulation.

 

By May Thet Hnin

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