Myanmar’s currency has lost more than 60% of its value since the beginning of September, boosting the cost of food and gasoline in an economy that has been in freefall since a military takeover eight months ago.
“This will cause worry among the generals, who are quite obsessed with the kyat rate as a larger barometer of the economy, and hence a reflection on themselves,” said Richard Horsey, an International Crisis Group Myanmar analyst. “The generals are concerned with the kyat rate as a larger barometer of the economy and so a reflection on themselves.”
The Central Bank of Myanmar sought to connect the kyat to the dollar by 0.8 percent on each side of its reference rate in August, but abandoned the plan on September 10 due to rising pressure on the exchange market.
Dollar scarcity has become so severe that numerous money changers have opted to close their doors.
Northern Breeze Exchange Service reported on Facebook that “all Northern Breeze Exchange Service branches are temporarily closed owing to the present currency price uncertainty.”
On Tuesday, those left in operation advertised a rate of 2,700 kyat per dollar, up from 1,695 on Sept. 1 and 1,395 on Feb. 1, when the military deposed a democratically elected government led by Nobel Laureate Aung San Suu Kyi and replaced it with a military-backed government.
According to a forecast released on Monday, Myanmar’s economy will fall by 18 percent this year, owing in part to the pandemic. It also anticipated that the country will face the region’s largest reduction in employment, as well as a rise in the number of poor people.
Following months of junta opponents’ rallies and strikes, there are signs of an upsurge in carnage, as armed militias have been more bold in their confrontations with the army, resulting in more casualties.
“The worse the political situation grows, the worse the currency rate gets,” said a senior executive at a Myanmar bank who requested anonymity due to company rules.
Myanmar is now coping with a second wave of coronavirus illnesses, which began in June, with the government’s response delayed by the objections of many health staff. The number of reported cases has decreased since its peak, but the true breadth of the outbreak remains unknown.
Stay-at-home orders have been lifted in a number of townships, but they remain in effect in other parts of the country.
In the immediate aftermath of the Feb. 1 coup, many people lined up to withdraw their savings from banks, and some even purchased gold. A jewellery seller in Yangon, on the other hand, reported that many desperate people were now attempting to sell their gold back to the bank.
When asked why it ended its controlled float policy earlier this month, the central bank did not provide a reason, although observers believe the bank’s foreign currency holdings had been significantly decreased.
The central bank’s officials did not answer to requests for information on how much foreign currency was still on hand, but according to World Bank data, the bank had only $7.67 billion in foreign currency reserves at the end of 2020.
Following the end of the controlled float, the central bank spent an additional $65 million, acquiring kyat at rates ranging from 1,750 to 1,755 per dollar between September 13 and September 27.
When asked about the impact of the central bank’s efforts, the bank executive admitted that they were limited in a currency market rife with uncertainty.
The economic crisis has driven up the price of staple items, and the United Nations Office for the Coordination of Humanitarian Affairs stated this week that nearly three million people in Myanmar now require humanitarian aid, up from one million just before the April military takeover.
A 48-kilogram bag of grains costs 48,000 kyat, up nearly 40% since the coup, while the price of fuel has nearly doubled to 1,445 kyat per litre, up nearly 40% since the revolution.
Businesses are also suffering as a result of the crisis, especially those that rely on raw material imports. A plastic bag manufacturer in Yangon stated that he had been forced to hike prices, and that as a result, sales had dropped by around 30%.
Myanmar’s per capita GDP was just $1,400 last year, and Zaw, a Yangon resident who asked to be named only by part of his name, was pessimistic about the country’s prospects. “My country is in peril,” Zaw declared.
“As a result, people will become impoverished.”