Burma’s stricken economy may receive input from the International Monetary Fund (IMF) to help adjust its foreign currency exchange rates, as it eyes greater investment stability and a way out of the current financial crisis.
In the past year alone, the local currency, the kyat, has appreciated 20 percent, according to Reuters. Much of this is put down to a weakening US dollar, although a huge discrepancy between official and unofficial exchange rates muddies the picture somewhat.
Hla Htun, Burma’s finance minister, told a meeting of the Bank Administration Committee in Naypyidaw last week that the government had been working to develop a systematic foreign currency market in the country and to specify official exchange rates.
The Voice news journal in Burma quoted Maung Maung Win, deputy chairman of the country’s Central Bank, that the government had sought IMF assistance, although it remains unclear whether this will be granted.
Burma has been an IMF and the World Bank member since 1952 but was suspended from receiving financial assistance in 1987.
Despite the suspension, the IMF is still mandated to exercise surveillance over Burma’s economy and its effects on the international monetary system.
Among the targets of assistance from the financial organ would likely be an attempt to narrow the vast differences between the two exchange rates – while the government has for long officially pegged the kyat at six to the dollar, most Burmese use the current blackmarket rate of 780 kyat to the dollar.
Analysts believe the reason for the discrepancy is so that the government can siphon vast sums of money to overseas accounts, thereby keeping them out of the national budget.
Maw Than, a former professor at University of Economics in Rangoon, said it would help Burmese businesses if the government were to re-specify the official exchange rates.
“[Business people] would be able to draw plans in advance based on exchange rates when developing projects,” he said. “They would be able to calculate their earnings in export businesses and also work out expenses for imports.”
He added that stability in the exchange rates is key, because “there will always be increasing and decreasing currency values depending on the demand, regardless of the value specified by the government.”
He said the whole process may take some time as a lot of steps need to be taken, including strengthening the international currency fund, enacting policies to allow Burmese to freely possess foreign currency without risk of imprisonment, abolishing Foreign Exchange Certificates and specifying new financial laws.