Gold traders in Burma are reportedly selling off their stocks for local Burmese currency the kyat, which has decreased in circulation following a recent spike in its value.
In recent months the US dollar has significantly weakened against the kyat, with the exchange rate now at around 750 to the dollar, down from 860 a couple of months ago. This has triggered alarm among the millions of labourers and exporters who are paid in dollars but who convert their earnings into kyat.
“Now they [gold traders] are selling all the gold they previously kept in stock as the Burmese currency is becoming strong,” said a businessman in Rangoon, speaking to DVB on condition of anonymity. He added that shops were also running low on gold, which is traditionally stockpiled by Burmese as a more financially stable alternative to the kyat.
From early in the morning on Friday last week to late in the evening the same day, the price of gold in Burma dropped by one percent, mirroring a similar fall in international prices. But given the dependence on gold, which is horded due to widespread distrust of Burma’s banks and to keep up with high inflation rates, the drop in price becomes more palpable.
A large source of the problem has been the woeful economic mismanagement of the Burmese regime, whose habit of printing money to fund spending has caused rampant increases in consumer prices.
The dip in circulation of the kyat is also, according to economist Khin Maung Nyo, a result of the government pocketing the produce from the mass sale of state-owned property last year, part of a privatisation drive that pre-empted the November elections.
Traders have also begun to stockpile Thai Baht, which as the dollar weakens can achieve better exchange rates with the kyat.
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.