YANGON — The Central Bank of Myanmar has sharply reduced its sales of US currency to private banks since late October, according to banking industry sources.
Since the end of last month, the Central Bank has decreased its sales of US currency by around $3 million per day, in the face of a strengthening US economy, a weakening kyat and a widening trade deficit in Myanmar.
“The Central Bank’s US dollar sales to private banks have decreased. It’s significant, it might be from US$10 million to $7 million,” said Chit Khine, the chairman of Myanmar Apex Bank.
On Friday, local publication 7 Days reported an anonymous employee saying that the Central Bank was issuing $25-27 million in US currency per day earlier this year, dropping down to $10 million per day in September, where the market had stabilized until recently.
The US dollar value has increased in the world market as the country has made a tentative recovery from the 2008 economic crisis and recession.
Since Nov. 7 last year, the US dollar has risen more than 8 percent against a raft of currencies known as the US Dollar Index, according to Bloomberg. The dollar’s rise on the index indicates strong performance over the last year across six major currencies meant to gauge the greenback’s value globally.
In the local currency market, the kyat has weakened relative to the greenback in recent months, trading at 970 to the dollar in September and increasing to more than 1,000 per dollar last week.
Another likely factor in the Central Bank’s decision to reduce US currency sales is Myanmar’s widening trade deficit in the country. As the Myanmar’s economy has undergone substantial restructuring since the installation of a nominally civilian government in 2011, total trade volume has increased, but a widening trade imbalance has emerged.
According to figures from the Central Statistical Organization, Myanmar’s total exports were valued at $1.08 billion from April to September this year, with total imports of $1.74 billion over the same period, leaving a trade deficit of nearly $660 million.
Economist Khin Maung Nyo said he expected that the Central Bank had reduced its sales to private banks partly in an effort to offset the trade deficit.
“I think the Central Bank is considering the trade deficit right now, that’s why they are decreasing US dollar sales to the market,” he said. “But it won’t be the only reason. It’s hard to guess what the Central Bank’s ideas are.”
Than Lwin, the vice chairman of Kanbawza Bank, said that the Central Bank’s actions were part of normal fluctuations in the banking sector.
“The drop from US$10 million to US$7 million issued to private banks from the Central Bank is not a surprise,” Than Lwin said. “It’s a normal condition in the banking sector that the Central Bank will watch and control the exchange currency market as part of their role.
“Though the Central Bank has decreased its sales amount, this will not impact upon the market, as private banks have their own money in addition to the individual money still flowing in the market,” he added.
Central Bank of Myanmar Deputy Governor Sett Aung was unavailable for comment to confirm the exact figure for today’s sales amount.
The kyat underwent a managed float in 2012, prior to which the government set the exchange rate at an absurdly inaccurate 6.4 kyats to the US dollar. Despite the official rate, the black market rate put the kyat much closer to its initial float value of 818 per US dollar.
Source: THE IRRAWADDY