Myanmar Spring Chronicle – August 15 Scene
(Moemaka) August 16, 2024
The Chaotic Kyat Exchange Rate and Fuel Crisis
Earlier this week, the kyat’s value plummeted, reaching over 7,000 kyats per dollar within hours. Although the exchange rate dropped slightly on August 15, it hasn’t returned to the levels before this chaotic spike.
The depreciation of the kyat is generally attributed to political and military events. However, questions remain about why this has occurred so suddenly in recent days, with no clear answers available. Some speculate that the military junta might be excessively printing currency. The recent detention and investigation of a prominent banker by the junta have also raised concerns, leading to restrictions on withdrawals from banks. Shortly after these restrictions were imposed, the central bank reportedly issued large amounts of cash to private banks, prompting speculation that the military junta may have been printing currency excessively, impacting the exchange rate.
Since the military coup over three years ago, the conflict has escalated significantly, with 2024 being one of the most intense years of warfare. As the fighting continues, military expenses rise, while the war also disrupts production, trade, and services, leading to a further decline in export revenues.
The displacement of thousands and even hundreds of thousands of people due to the conflict adds significant costs. In Sagaing and Upper Magway, villagers may flee to neighboring villages or into nearby forests. However, in northern Shan State, where the conflict is widespread, people often flee from one town to another for safety, sometimes traveling long distances to find refuge. Those who can afford it flee by car or motorcycle.
In such a situation, the balance between Myanmar’s production and military expenses has shifted, contributing to the depreciation of the kyat. Meanwhile, the junta’s restrictions on fuel imports and attempts to control prices by selling foreign currency to fuel importers have led to shortages. Due to delays in providing the necessary foreign currency to importers, fuel shortages have occurred, affecting even cities not yet impacted by the war.
In conflict-affected areas, fuel prices have been skyrocketing. In some regions, like northern Shan State, a liter of gasoline has exceeded 20,000 kyats. This rise in fuel prices increases the cost of living, especially for those with low incomes, making survival even more challenging.
The current situation, with long lines of vehicles and motorcycles waiting overnight for fuel, is worsening the already dire circumstances. The fuel crisis is driving up the cost of goods, production, and essential services, impacting education and employment significantly.
In recent history, Sri Lanka is an example of a country where the economy collapsed. The Sri Lankan government, under President Rajapaksa, became an authoritarian regime, leading to an economic collapse when the country ran out of foreign currency to import fuel, causing daily life to grind to a halt. This triggered a mass uprising in May 2022, leading to the president’s downfall. The Myanmar junta is likely aware of such risks, despite their efforts to maintain control through repression.
However, the current economic downturn, coupled with the junta’s mismanagement of the economy and excessive military spending, suggests that the circumstances leading to these events have been building up. If the junta cannot resolve these issues, the country’s deteriorating economy and daily struggles may signal the final countdown for the military dictatorship.