The dollar tapered against the kyat on August 16 after the Central Bank of Myanmar (CBM) sold a record US$4 million to local private banks. That helped ground the exchange rate, which is up by around 10 percent since May.
To place a floor under the depreciating kyat, the CBM has sold US$100,000 per day to private banks since July 27. When those attempts failed to stabilise the exchange rate, the Central Bank raised its daily dollar sales to $1.6 million on August 15 and $4 million August 16, which is a total of $5.6 million pumped into the economy in two days.
“The CBM will try various solutions to stabilise the exchange rate. Currently, it is raising the amount of dollars sold daily to local banks,” said Daw May Toe Win, Director General Foreign Exchange Management Department.
Among the reasons for the soaring exchange rate is a shortage of legal dollars in the country. The large infusion of dollars into the economy finally succeeded in bringing down the exchange rate from K1,540-K1,570 sold by licensed money changers on August 16, to K1,520-K1,535 by 3pm on the same day.
Still, the CBM set its dollar-to-kyat reference rate for August 16 at a record high of K1,498 per dollar. The Central Bank sets its reference rate based mainly on demand at its daily dollar auctions.
Since July 27, it has sold nearly $7 million to local banks, said Daw May Toe Win.”We will continue to increase our US dollar sales to stabilise the value of the kyat and when necessary, we will also consider giving out loans in dollars,” she said.
But the CBM’s efforts are short term are merely short term stopgap measures. To raise and stabilise the value of the kyat for the long term, the government has a role to play in promoting domestic production and exports as well as encouraging import substitution, said Dr Soe Tun, a local businessman.
In addition, foreigners in Myanmar should be allowed to open bank accounts with interest at foreign banks to ensure a larger volume of foreign currency remains in the country. “The main inflow of foreign currency is from exporters. As such, the government needs to develop banking and financial systems that support them,” he said
Dr Soe Tun added that trading in other currencies should be allowed to discourage the economy from relying solely on the dollar.
Source: MYANMAR TIMES
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