Remittance services used by thousands of Burmese abroad are grinding to a halt following a recent drop in circulation of the Burmese currency, the kyat.
Money is regularly sent by relatives abroad to families in Burma via an of informal value transfer system known as the hundi, which often acts as a lifeline for citizens of Southeast Asia’s poorest country. The World Bank estimated that in 2008 alone, remittances totalled $US150 million.
But a strengthening of the kyat has meant that the flow of money to families inside Burma has dramatically slowed, from a normal one-day transfer period to up to three days depending on the location of the sender.
Hundi operators have told DVB that they are putting services on hold as the country gauges how its unstable currency will fare in the near future. In the past two months the kyat has significantly strengthened against the US dollar, from 860 in April to 750 now.
The strengthening has also triggered alarm among the millions of Burmese, particularly labourers and exporters, who are paid in dollars but who convert their earnings into kyat.
Business owners and economic analysts have speculated that the drop in circulation of the kyat may be related to the government’s mass auctioning of state property last year. Observers have accused it of pocketing the earnings in order to reduce their circulation, thereby manufacture a strengthening of the currency.
Despite the likely hardships for Burmese resulting from the financial crisis, commodity prices continue to rise, aided by the government’s habit of printing money to fund spending.
Although dollar-dependent exporters and labours have been the hardest hit, there are fears that a ripple-effect could see farmers suffer as demand for increasingly expensive agricultural exports falls. The phenomenon has also reportedly sparked a hike in basic foodstuffs and transportation charges.
According to a 2010 report by the Asia Society, the average Burmese citizen spends more than 70 percent of his or her income on food, the highest proportion in Southeast Asia.