Myanmar Spring Chronicle – August 14 Scenes
MoeMaKa, August 15, 2023
The lives of Myanmar people that are suffering from the impact of civil war and high commodity prices
After the military coup, the depreciation of the currency usually occurs once every 8 to 10 months, and when compared to the period before the coup, the current value of the Myanmar kyat has doubled. Before the seizure of military power, 1 US dollar was around 1700 to 1800 kyats, but now the exchange rate is over 3400-3500 to 1 dollar. It went up in April 2022 last year, then reached almost 3,000 kyats around August, and then decreased slightly, remaining around 2,800 kyats for several months. It quickly reached more than 3,000 kyats after the recent news that 20,000 kyat banknotes will be issued and another financial sanction of the United States on the military council’s 2 foreign currency service banks.
No economic expert can draw a definite conclusion about the reason for the depreciation of the Myanmar currency, but if we study the circumstances of the sudden drop in value and the policy decisions, issued orders, and sanctions before these events, we can draw a general conclusion.
When the military council took power, the internet cuts, the incitement to withdraw money from the banks, the reduction of aid, and the cuts and sanctions from the international government and financial institutions due to the military coup, and further potential combined, causing the instability of the value of the Kyat, the accumulation of foreign currency, and the difference in value between money and banknotes in bank accounts. The first effect of that period was the depreciation of the Myanmar kyat.
After that, the departure of large international energy and telecom companies that have invested in Myanmar has caused decreased faith in Myanmar’s currency and fueled the decline in currency value again.
At the beginning of April 2022, the military council, looking at the political upheaval caused by the foreign exchange crisis in Sri Lanka, devised various ways to bring more foreign currency into the country, and the central bank issued foreign exchange policies and orders continuously. The military council issued orders and instructions to convert a percentage of the money earned from exports into Myanmar kyats within 24 hours in order to get more foreign currency starting around April 2022.
While the military council is in desperate need of such foreign money, the money received by local and international NGO organizations for humanitarian aid, capacity building, and development has been strictly interrogated. Since early August 2022, international and local NGOs have been banned from accepting foreign currency if they do not have a cooperation MoU with a government ministry. Due to these orders and prohibitions, the value of the Myanmar kyat has further decreased.
These events not only affect import product businesses and international and domestic NGOs, but also cause the consequences of rising foreign exchange rates and domestic product prices one after the other. When the price of the dollar rises, the product that is immediately affected is fuel, and it will quickly affect people’s daily lives, such as gasoline, diesel, medicine, imported consumer goods, and fertilizer for agriculture. The impact of the Ukraine-Russia war, the rise in fuel prices, the rise in the prices of food, and edible oil have had more or less negative effects on Myanmar.
As mentioned above, along with the factors and events related to the depreciation of the kyat and the consequences of the military coup in Myanmar, such as armed clashes, the blockade of roads and waterways connecting the warring states and regions, and the unprecedented increase in taxes called gate fees and surcharges, the conflict areas and the areas related to these areas are the areas that are most affected by the increase in commodity prices. As an example, Paletwa Township, in the south of Chin State, can only be transported by a waterway that is connected through Kyauktaw in Rakhine State. Because of the armed conflicts that took place before the military coup, the military council restricted the transportation of food, so people in the township had to pay more than 100,000 kyats to buy a bag of rice before the military coup. In the originally underdeveloped region, in a situation of low income, the lives of the local people, who have to buy fuel, rice, and medicine at high prices due to the blockade, are more difficult than in other parts of Myanmar.
After the coup, situations like Paletwa have been faced in Karenni State and Sagaing Region. Exorbitant taxes on transporting food, fuel, and medicine across military-dominated areas to landlocked regions have caused great burdens and further eroded purchasing power. In areas such as Sagaing, where rice is abundant, due to armed conflicts, local farmers could no longer grow rice as well as before, and the food they had was burned and destroyed when the military council columns marched. These conditions, blockades, and rising commodity prices will continue to occur, and we are seeing the possibility that floods in the rainy season will affect food production, especially rice cultivation. Next year, due to the decrease in rice production, the price of rice may rise again, the amount of money that can be purchased due to the depreciation of the Kyat currency will decrease, and the people of Myanmar at the bottom will continue to suffer.