Floods take a toll on domestic economy

Commodity prices have spiked with the flooding of hundreds of thousands of acres of farmland, hitting domestic consumers in the pocketbook.

Experts are calling for a coordinated government and private sector response to ensure the spike does not get out of control.

U Ko Ko Gyi, a member of the Pyithu Hluttaw from Mandalay Region and chair of the Mandalay Commodity Centre, said beans and pulses are as much as 80 percent higher than they were a month ago, before the floods.

Edible oil is also up about 40pc, partly on the flood damaging crops and hindering transport, but also because of the depreciating kyat.

Representatives from different parts of Mandalay are set to discuss the issue on August 10.

“The commodity shortage could continue for the long run. The government needs to think about the situation on a national level – how much do we need to export, and how much do we export,” he said.

Other commodities have also jumped significantly in price, though spikes in goods like the rice prices may be due more to public perceptions of a future problem, rather than any current shortage, he said. Sentiment pushing up prices has been seen in other goods such as animal food.

The Myanmar Rice Federation has announced a temporary 45-day halt of rice exports until September 15.

Ministry of Commerce director U Win Myint said rice and other agricultural exports will drop because of the floods, though added there will be sufficient product for most domestic consumption.

“The main reason prices are currently skyrocketing is inconvenient logistics, as well as speculation,” he said. “The government is working to manage the problem.”

U Win Myint added he expects damaged farmland to total about 1 million of the total 15 million acres in the entire country. Each government ministry has been instructed from August 3 to check the floods’ impact on the economy.

Hikes in commodity prices inevitably occur when supply lowers, according to economist U Hla Maung. Rising costs of goods can also lead to currency depreciation, he said.

Recent estimates have put inflation at about 8.1 to 8.5pc as government expenditures have increased on rising salaries and election preparations, while imports become more expensive due to the weakening currency.

The kyat has fallen over 20pc this year, though the market has now stabilised at around K1234 per dollar as of yesterday.

U Hla Maung said the economics effects of the flooding will become more apparent in the coming months. He pointed to the after-effects of Cyclone Nargis in 2008, where many affected farmers lost their properties and moved to Yangon’s outskirt areas.

“Natural disasters are a current problem that we didn’t expect. Inflation will reach into the double digits if the government does not manage it immediately,” he said.

Source: Myanmar Times

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