The junta’s Central Bank of Myanmar (CBM) issued an order on July 13 instructing both domestic and international companies and organizations with foreign loans to temporarily suspend loan interest repayments.
Banks with Authorized Dealer (AD) licenses to purchase foreign currency were sent a letter stating that AD licensed banks were encouraged to inform customers of the schedule of loan repayments from foreign lenders so they can prepare as necessary.
Individuals in the business sector surmised that the directive was intended to tighten the flow of foreign currency out of the country.
Critics highlighted how the order will put up further barriers against foreign firms operating in Burma, and that foreign lenders will now likely withhold low interest financial products from the Burmese market.
According to foreign exchange regulations, local and international companies and organizations must meet certain criteria to take out loans from foreign banks — parent companies are only allowed to do so after obtaining permission from the CBM.
The junta’s increasingly desperate and self-sabotaging CBM also instructed AD licensed banks to convert the foreign currency accounts of Burmese companies with up to 35 percent foreign ownership into Burmese kyats by July 18.
It informed companies that opened accounts at respective AD licensed banks with foreign currency to submit the amount of USD held in their foreign currency accounts to the CBM by July 18.
The bank warned that it will take action against companies that fail to follow their directives in accordance with the Foreign Exchange Management Law.
The junta has attempted to battle deflationary pressures against the kyat by forcing foreign currency holders to exchange dollars at a rate of US$1/K1,850 despite the black market rate rising to over K2,100 against the dollar.
The pre-coup value of the then exponentially strengthening Myanmar kyat was ~K1,330/US$1.