What are the reasons for the depreciation of Myanmar Kyat? What will be the consequences?

Myanmar Spring Chronicle – August 31 Scenes

MoeMaKa, September 01 2022

 The value of the Myanmar kyat was only 1,625 kyats per dollar on August 31 last year, but after the September D-Day announcement, it rose to more than 2,000 kyats per dollar on the pretext of political situations. In September, during the days with the highest prices, a dollar was exchanged between 2,500 and 2,700 kyats, and then fell back to below 2,000 kyats.


From just after the military coup last year until the end of the year, the central bank sporadically issued and sold dollars to try to control the dollar price. It was sold to banks that were allowed to exchange foreign currency, and there was no statement about specific statistical information in which banks were allowed to buy how many dollars.


But, after this New Year, in April, instead of selling dollars, the central bank issued an order to exchange dollars and foreign currencies received from abroad through other means, including importing businesses, with Myanmar currency within 24 hours, after setting a price. Since that time, the dollar price became unstable until the beginning of August, and during August, the value of the dollar rose even worse.


Here, the central bank issued orders and controlled the entry and exit of dollars from the market, perhaps because the need for dollars for their own hidden interest and agendas was far more important than to stabilize the economy. It is estimated that after the coup, there is more need for foreign currency to import military weapons from abroad and to purchase raw materials for military equipment factories because of the ongoing armed battles. While some countries stopped aid, discouraged economic investment and some large international companies withdrew, the inflow of foreign currency decreased more than before and domestic demand increased. There are enough reasons for the dollar to rise.


However, the reasons why it has been skyrocketed at unprecedented rates from 500 to 700 kyats per day in recent weeks are not only the political and economic factors described above, there may also be due to those who take part in playing the price in the rapidly changing market.


If you think about who will be affected by the unprecedented increase in the price of the dollar, everyone who uses fuel will be affected. All those dependent on medicine from abroad suffer from high prices. Similarly, due to the rise in the prices of edible oil and fertilizers imported from abroad, costs for cultivation have increased and prices of daily consumption products such as rice, onion and beans etc. have also increased.


These days, in the retail market, one viss of onion is sold for 3,500 kyats and garlic for 7,000 kyats. The prices of chicken and duck eggs also increased significantly and there were prices of chicken meat, pork and vegetables left among the food products, whose prices did not increase significantly.


As there is no possibility of an increase in the salary of wage laborers and salaried employees in this short period of time, the people who would suffer most from rises in prices of food products, medicines for health and travel expenses, are wage workers and those who live in rural areas. In this time with political instability, no one will take seriously labor rights or basic salary etc. and also, the situation becomes like this, the entrepreneurs and factory owners don’t need to be held accountable at this time. So, wage workers are the ones who would suffer the most from these high prices.


The people living in the towns and villages will have to suffer the effects of war and inflation due to the conditions where they had to flee from war in armed conflict areas, food and houses were lost, and they couldn’t do agriculture. If there is any urgent need for medical treatment, they will have to face an unprecedented high price.

There is also speculation that the dollar will continue to skyrocket and the economy will stop, and there may be some hope that in this way the military council could be toppled from power. They may think that in Sri Lanka, when people are faced with difficulties and crises, and they all come out on the streets and they were able to pressure the president to leave the country.

The difference is that Sri Lanka is aiming to remove the corrupt president and his relatives from office, while Myanmar is aiming to remove the entire military that is involved in politics.

In Sri Lanka, public pressure gained victory when the president ran away from the country. As for Myanmar, the task of removing the interference and control in the political power of the military rooted in various fields, will be more difficult than removing the political power of a single group of people or relatives.