Skyrocketing commodity prices will affect millions

Basic commodity prices rose at the end of November due to the appreciation of US dollar throughout the month and the news that salaries of parliamentarians and civil servants will be increased. Critics say that the government must address these two causes in order to reverse the hike in the commodity prices.

The greenback hit its highest point in mid-November, rising from Ks 987 in the early October to Ks 1,054 on November 20, and decreased slightly at the end of the month. The appreciation of US dollar has caused basic commodity prices to rise.

The dollar exchange market began to stabilize soon after the Central Bank of Myanmar (CBM) instructed private banks to buy and sell dollars within +/- 0.8 per cent of the official exchange rate. The dollar buying price depreciated to Ks 1,035 on November 28. Still, commodity prices remain high.

According to one estimation, the Myanmar currency value has weakened by 10-20 per cent.

“The price of a bag of rice has increased by Ks 2,000 since October. Not just fish and meat prices but also vegetable and fruit prices are high. Now the dollar price has stabilized, but the commodity prices have not gone down,” said Ma Gyi Than, a housewife in Yangon.

According to the International Monetary Fund (IMF), Myanmar’s economy is estimated to grow by 8 percent and inflation by 6 percent. Economists pointed out that due to the recent dollar appreciation, the inflation rate may rise higher than expected.

In the recent days, the price of gold per ounce reached US$1,185 in the international market. Local gold prices stood between Ks 665,000 and KS 666,000 per ounce. Due to the greenback appreciation,

“Other commodity prices rise due to the dollar appreciation, but some merchants raise commodity prices as they want to make price speculations. For instance, the hike in paddy prices has no direct impact on farmers. Merchants and brokers raise the prices of stocks in hand. But high inflation has an impact on consumers. Salary increases for civil servants have compounded the inflation problem. In fact, only civil servants will be able to enjoy the salary increase. Merchants and brokers will raise commodity prices to take advantages of it,” said retired professor Dr Maung Maung Soe from the Applied Economics Department at the Yangon Institute of Economics.

Most countries calculate inflation rates based on the prices of basic commodities. Traditionally, Myanmar calculates its inflation rate based on the prices of 135 commodities, excluding real-estate and land prices. Myanmar does take house rental fees into account.

“Commodity prices never go down after having gone up. The grassroots have to earn their livings from hand to mouth. For that, the grassroots need to have more incomes to cover their expenditures,” said Khaing Khaing Nwe, managing director from the Best International Co Ltd.

“Money is volatile. Extra expenses like taxi fares should also be considered as the congestion worsens every day – we have to fetch cabs to reach somewhere important. The prices of basic foodstuffs are also skyrocketing. So the family budget for health and education becomes tight,” said a housewife in Yangon.

“The greenback has been declining in the last few days. It is now stable thanks to the grip of the Central Bank. But we don’t feel secure, as [the government] sets to increase salaries. The price of chicken doubled this year. My expenses have increased by 10 per cent,” said a business person.

A lawyer weighed in, saying, “I wonder if there is a mastermind behind the plot of raising parliamentarians’ salaries. The salaries of staff from different levels should also be raised to balance the increase. We’ve heard there are plans for this, but we need to consider the inflation triggered by such huge salaries.”

Financial Minister Win Shein said in March that the salaries of civil servants would be raised by Ks 20,000 per month, in line with this year’s budget plan.

Since the beginning of President Thein Sein’s administration, the salaries of civil servants have been increased in 2013 and 2014.

Experts believe that in Myanmar there are three indicators of inflation: dollar appreciation, rising gold and petroleum prices and rising salaries.

Examples show that once prices rise, they do not drop.

“The officials should look to the root of inflation and handle it rather than raising salaries.”

Dr Khin Maung Nyo, a well-known writer, offered a different take, saying, “A reasonable price hike is acceptable. But the government must give a hand to grassroots. Sometimes, a price hike is beneficial to manufacturers.”

“The government and NGOs should join hands to support people from working class,” he said.

Economist Myint Thaung said, “Rising salaries usually accompany rising demand and, eventually, increasing expenses. It all gets messy when the expenses shoot up before people can actually enjoy their increased income.”

Maung Maung Soe said, “Increased salaries don’t add up to even one per cent of gross domestic product. But expenditures still soar nationwide. Merchants and vendors are very attentive when it comes to raising commodity prices.”

Boosting salaries through a systematic, long-term strategy would not affect inflation as much, said economist Soe Thein.

More than 1.4 million civil servants nationwide – including those of the Defence Ministry – will enjoy salary increases.

“The remaining 50 million people are likely to suffer from rising expenditures,” said Finance Minister Win Shein during a parliamentary session on November 26.


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