Myanmar’s Central Bank is braced for a deeper slide in the nation’s currency and has little scope to tackle the decline after the kyat fell the most in Asia, according to one of the monetary authority’s top officials.
The kyat has weakened about 10 percent against the dollar in the past six months, according to data compiled by Bloomberg . The drop could deepen if the U.S. Federal Reserve increases interest rates this month as expected, said U Win Thaw, the director general of the foreign-exchange management department in the Central Bank of Myanmar.
“There’s no way for the central bank to intervene in the market,” he said in an interview by phone from his office in Yangon. “The depreciating kyat impacts on the economic stability of the country. Compared with other currencies, our drop is very rough at the moment.”
The currency weakness has sparked a debate in Myanmar about whether officials should seek ways to stem the drop or let market forces find an equilibrium in an economy set for the world’s second-fastest expansion in 2016 (+8.1% expected GDP growth).
Depreciation however raises the cost of imports such as oil, while boosting the outlook for exports ranging from natural gas to minerals. Currency swings can also make it harder for businesses to plan investments.
The finance ministry and central bank set up a committee in October to scrutinize exchange-rate volatility, the Myanmar Times reported. “A floating currency is exactly what Myanmar needs,” he said, adding an inflation rate of about 9 percent is another factor weighing on the kyat. Myanmar local currency has been very volatile since its floating in 2015. It declined last year by 25% against the greenback
Is the declining Kyat be beneficial for travellers to the country? It is unlikely to have any impact on tourists except when buying local goods or eating at local food outlets where only kyat are accepted. However, various official fees or hotel rates continue to be quoted in dollars, neutralizing the benefit of the country’s national currency decline.
For example, Inlay hotel zone entrance fees will from Sunday December 10 be collected in US dollars instead of local currency effective 10 December. Earlier this year, the Myo group, which is in charge of collecting entrance fees, were changed from US dollar to Kyat. From Sunday, any tourist will have to fetch a US$10 bill instead of Kyat 12,500 per person.
In 2012, one US dollar was equivalent to 822 Kyat, before reaching in November 2014 the 1,000 mark for one dollar. On December 9, 2016, one dollar was worth 1,330 Kyat after reaching a low of 1,167 Kyat on May 1 of this year.