Myanmar aims to stabilize its currency to control price pressures, the central bank said, as the kyat weakens in the black market.
(Bloomberg) — Myanmar aims to stabilize its currency to control price pressures, the central bank said, as the kyat weakens in the black market.
“The Central Bank of Myanmar is monitoring the foreign-exchange rate to prevent inflation,” Win Myint, director general of the Central Bank of Myanmar’s currency management department, said in a statement on the government’s website on Wednesday.
“Daily foreign currency inflow/outflow is closely monitored,” he said. “If there is a demand for foreign currency in the market, we provide financing to banks, importers and businesses that need foreign currency.”
The rare comments from the CBM come amid the issuance of 20,000 kyat bank notes this month that fueled speculation there would be more money in circulation that can further stoke prices and weaken the currency. Elevated inflation and a more volatile kyat are adding pressures to the conflict-ridden economy overseen by a junta that’s been using force to crack down on political opponents.
The CBM said each person can only exchange old or damaged bills to up to three 20,000 new kyat notes so there won’t be any expansion in money supply and thus, shouldn’t spur prices. The latest available data from the World Bank indicate that inflation accelerated to 18.3% year-on-year in September 2022, and is projected to ease to 14% by the end of the third quarter.
Myanmar’s currency has weakened against the dollar in the black market since the start of June, after months of stability, as dollar demand for imports and foreign payments increased, the World Bank said. Myanmar has capped the kyat at 2,100 per dollar in the official market since August last year, switching to a fixed exchange-rate regime after the currency lost 40% since the end of 2020.
“The total amount of money in the country’s economic system is continuously monitored every year, and we make sure to be within the target amount,” according to Win Myint. The CBM “is applying a moderately tight monetary policy,” he said.
The central bank raised the required reserve ratio by 50 basis points to 3.5% in April.
Authorities have also taken steps to reduce dependence on the US dollar. The use of the yuan for trade with China and baht for trade with Thailand was mandated and the central bank is negotiating with its Indian counterpart for a rupee-kyat payment and settlement mechanism.
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