Yangon (Chindwin): With an economy already weakened by the COVID-19 pandemic, the current kyat inflation has sent prices soaring for goods, electricity, gas, and oil, reaching a record high in the last five years.
People who depend on paycheck to paycheck are the hardest hit by the shock economic crisis, which World bank predicted in July that the economy would contract around 18 percent in the country’s fiscal year between October 2020 – September 2021, with damaging implications for approximately a million jobs loss following the coup. It has also forecast that the share of Myanmar’s population living in poverty is likely to more than double by the beginning of 2022.
The country is now facing the near-total collapse as it is wrestling with multifaced crises – political, economic, and humanitarian.
As of today, a U.S dollar price is Kyats 2700, reaching the highest in recorded history.
Despite the U.S currency inflation reaching 2700 Kyat, the Central Bank of Myanmar (CBM), the public treasury, sold another U.S $15 million today with the auction price of 1755 MMK for a dollar. It is much cheaper than the market price outside, and it is 30% lower than the real value at the market-clearing price.
Almost every week, the CBM sells $15 million of U.S dollars. To the public, questions about who bought the U.S currency and where it goes remain a mystery.
Today’s inflation figures reflect a sharp increase in the prices of goods, but local economists warn it may rise higher as the decline in the value of Myanmar’s currency has pushed up all costs.
On the other hand, the U.S sanction has effectively choked off the flows of foreign currency into the country, sending widespread pessimism about the future of Myanmar’s economy.
The U.S dollar has never fallen but has risen sharply since the military took over the power from the civilian government.
Some economists believe the reasons why the U.S dollar is appreciating, and Myanmar’s currency is depreciating could be the impairing banking system, among other factors.
But the main problem appears to be the loss of public trust in the military junta and its controlled banking industries, even if the military junta might be able to pay off the country’s debts in dollars or debt defaults.
A local economist contacted by The Chindwin suggests that the stumbling economy and the depreciation are a direct result of political turmoil caused by the military coup, providing the evidence of the country’s worsening economic crisis. He added that Myanmar’s debt did not reach a distress level when the military toppled NLD’s government.
So, the current situation is said to have been exacerbated by a lack of public trust in all institutions controlled by the military, including Myanmar Central Bank (MCB), resulting in people less deposit in the banks, and slowly withdraw the limited amount of 5 lakhs (about $220) per individual, and 50 Lakhs (about $2200) per company in a week according to the CBM policies.
As a result, there seems to be no work for banks since the banks are not getting back the loan and the worst of debt is the non-performing loans with no interest paid while no depositors.
The kyat depreciated by more than 50% within eight months after the military coup. Construction materials in the country have risen by as much as 30 per cent due to the sharp rise in the value of the dollar, according to traders.
Along with the rise of dollar price, commodity prices rise while the limitation to withdraw the required amount from the bank leads to a high risk of plunging the country into poverty as almost half of the population will potentially go below the poverty line because of the inflation and devaluation.