Irrawaddy-Aug 20
Myanmar’s debilitating currency crisis is creating a growing opportunity for the regime to profit from controlling foreign-currency exchange, with the gap in rates giving it access to as much as 6.4 trillion kyats (US$1.8 billion) in the year to June 22, an analysis by a Myanmar-focused economist found. “The military’s forex policies will become more important in the future, in part because the growing exchange rate gap will further benefit the regime … It is important to start understanding the SAC [State Administration Council] as a regime whose retention of power increasingly depends on forex policies,” Jared Bissinger wrote in “Myanmar’s Military Funds Its War Through Forex Policy.” Market rates for the kyat have plunged from a high of about 1,300 to the US dollar in the month before the Feb. 1, 2021 coup to 6,350 to the greenback on Monday. The Central Bank of Myanmar’s official exchange rate is 2,100 kyats to the dollar, although it has since late last year allowed some trading among authorized dealers on its online platform at 2,900 kyats to the dollar. The arbitrage opportunity comes from forcing businesses and individuals to convert their foreign currency into kyat at rates that vastly overvalue Myanmar’s currency. The size of this difference is larger than annual commercial and income tax collection and possibly revenues from sales of natural gas in the last fiscal year. The $1.8 billion gap between market and forced forex conversion rates in the year to June 22 is also about the same as the regime spent on its defense budget in the last fiscal year, he said. Most of the arbitrage opportunities – about 75% – came from forced conversion at the official rate, while the rest came from forced conversion at the central bank’s platform rate. Bissinger based his calculation on daily market and official exchange rates, and volume data during the 12-month period. “These forex controls give the Myanmar military widespread power and opportunities for profit. Some discounted forex likely goes to private companies that facilitate military-related imports,” he said. Read more at: https://www.irrawaddy.com/news/burma/myanmars-junta-is-funding-its-war-through-forex-scams-economists-say.html
