Escalating Fuel Shortages Drive Soaring Commodity Prices

Myanmar Spring Chronicle – December 05

MoeMaKa, December 07, 2023

Escalating Fuel Shortages Drive Soaring Commodity Prices

Cities like Yangon, Mandalay, and Nay Pyi Taw are grappling with a stark reality—fuel shortages. Signboards at fuel stations bear testament to the scarcity, with only two types of fuel available at various prices, a stark contrast to the previous array of more than five options. Some residents are now forced to seek fuel beyond city limits, resulting in long queues stretching over a mile, particularly at fuel shops where urban and business vehicles converge.

The aftermath of widespread conflict in recent months has spurred unpredictable fuel pricing in rural areas and blocked regions. Rakhine State, Chin State, Kale, numerous townships in Sagaing Division, and Karenni State face inflated fuel costs due to blockades, transportation restrictions from armed conflicts, reduced cross-border trading, and logistical challenges. While cities had initially avoided similar problems, recent fuel imports have been hampered by a foreign currency shortage, compounding the fuel crisis.

The Military Council’s Central Bank of Myanmar, which previously sold the dollar at 2,100 kyats per dollar to fuel-importing private companies, now faces limitations. Unable to continue selling the dollar at this rate, the recent fuel price surge has reached approximately 340 kyats per liter. Foreign currencies from exports must be exchanged at the Central Bank, with 50% at the rate of 2,100 kyats per dollar, and the remainder at licensed foreign currency exchange businesses, banks, or companies, as per the Central Bank’s stipulations, exchanging at a rate of 2900 kyats per dollar. The scarcity of foreign currency poses a critical challenge for oil purchases, leading to the ongoing fuel shortage.

The extent of the crisis behind these incidents remains uncertain. In recent years, Sri Lanka faced a similar foreign currency shortage, resulting in suspended services, weeks of disruptions in schools and offices, and widespread protests forcing a change in government. Unlike Sri Lanka, Myanmar’s predicament arises from governance mismanagement, the severe impact of war on the economy, decreased production despite increased budget spending for warfare, and public losses and economic setbacks as a consequence of the conflict.

While Myanmar does not currently face famine due to ample food production, a substantial population, sufficient job opportunities, and reasonable educational capabilities, the unprecedented crisis unfolding stems from armed conflict and resource losses following the military coup.

The resolution timeline for the fuel shortage in military-controlled cities remains uncertain. There is growing concern about potential ramifications, including the impact on production, challenges in agricultural product sales for farmers due to rising transportation costs, and heightened commodity prices for consumers due to transportation difficulties.

The current fuel shortage dilemma underscores the military council’s mismanagement, raising concerns that attempts to address one issue may inadvertently give rise to others.