Many countries under military rule are worried about potential losses due to the Central Bank of Myanmar’s order that all foreign currency held in bank accounts must be converted into local currency. Businesses and individuals must exchange dollars or other foreign currencies for kyats within a day from Monday or face legal consequences, said a statement issued on Sunday. Foreign currency can only be transferred abroad with government approval, the newspaper said.
A central bank presidential decree directed foreign currency account holders in Myanmar to open new accounts to convert their funds into Kyat (pronounced CHUHT). Those who earn foreign currency must convert it into non-redeemable kyat and should not take it out of the country. A Kamboza Bank official said on Tuesday that some traders and seafarers had come to inquire about opening the needed new business accounts, but said most were “thinking about it.”
Myanmar’s military leader faces a series of sanctions after taking power on February 1, 2021 and overthrowing the country’s elected government. The foreign exchange handover order suggests officials may be running out of the foreign currency they need to pay off debts and buy essential goods such as oil, gas and weapons. Foreign currency is also needed to service Myanmar’s external debt of about US$10 billion to US$11 billion.
An employee at the bank, who spoke on condition of anonymity, said account holders are losing money as the central bank’s exchange rate of 1,850 kyats to the dollar is below the prevailing black market rate of 2,030 kyats to the dollar. Unlicensed money changers consulted on Tuesday said they did not exchange money. Of the seven people with foreign currency accounts interviewed after the order, most had not opened new accounts and were unaware of the results.
Their foreign assets were frozen when the country lost most of its tourism income due to the pandemic. According to the World Bank, as of December 2020, Myanmar’s foreign exchange reserves have reached nearly US$7.8 billion. Military leaders have also sought to ease pressure on foreign exchange reserves by encouraging the use of Thai baht, Indian rupees and Chinese yuan (yuan) for border trade.
A businessman at a trading company said big companies already have such accounts and banks convert export earnings into kyats. In a post on Facebook, the businessman said the bank sent him a box of cakes as a gift after he exchanged his foreign exchange holdings for chat, which he said was worth “millions” and the name of the cake joked that it was “tears”of an exporter’s. After the military seized power last year, Western governments imposed targeted sanctions on the military, military companies, officials, and their families.
- Myanmar orders the conversion of foreign currency held by banks to kyats
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