New com­mit­tee tack­les ex­change rate

The Myanmar Times - - Business - STEVE GIL­MORE s.gil­more@mm­times.com – Ad­di­tional re­port­ing by Htinn Lynn Aung

A COM­MIT­TEE chaired by of­fi­cials from the fi­nance min­istry and the Cen­tral Bank has been cre­ated to deal with ex­change rate volatil­ity.

Set up in Oc­to­ber, the group is chaired by U Maung Maung Win, deputy min­is­ter for fi­nance and planning, and U Set Aung, deputy gover­nor of the Cen­tral Bank. Se­nior of­fi­cials from var­i­ous sta­te­owned en­ter­prises and the Fi­nan­cial Reg­u­la­tion Depart­ment also sit on the com­mit­tee, U Maung Maung Win told The Myan­mar Times.

The “joint co­or­di­na­tion com­mit­tee” will work with govern­ment min­istries, such as the Min­istry of Con­struc­tion and the Min­istry of In­dus­try, which su­per­vise sec­tors heav­ily re­liant on for­eign ex­change, are ac­tively in­volved in im­port-ex­port op­er­a­tions, or help set trade pol­icy, U Maung Maung Win said.

State-owned en­ter­prises that are in­volved in for­eign ex­change trans­ac­tions, such as the state-owned banks that dom­i­nate the lo­cal mar­ket for for­eign cur­rency ac­counts or firms with for­eign ex­change earn­ings, will also be in­volved, he added.

U Maung Maung Win said the com­mit­tee was re­spon­si­ble for sub­mit­ting sug­ges­tions and pol­icy ad­vice to the fi­nance min­istry and the Cen­tral Bank. Al­though the com­mit­tee has only met once thus far, it has al­ready pro­vided some ini­tial sug­ges­tions, he said. U Maung Maung Win would not com­ment on the de­tails, but said he ex­pected an of­fi­cial pol­icy re­sponse from the govern­ment soon.

Myan­mar com­pa­nies, banks and busi­ness­peo­ple have been call­ing on the govern­ment to address the ex­change rate is­sue for years. Cur­rency volatil­ity is com­mon in de­vel­op­ing coun­tries, par­tic­u­larly those like Myan­mar that are in the process of open­ing up the econ­omy to for­eign in­vest­ment.

But the busi­ness com­mu­nity be­lieves that a co­or­di­nated ef­fort from the au­thor­i­ties could still lessen sharp swings in the value of the kyat, which has weak­ened 10 per­cent against the dol­lar since July.

Econ­o­mist U Aung Ko Ko told The Myan­mar Times that co­op­er­a­tion among govern­ment min­istries was a mat­ter of ur­gency, in par­tic­u­lar be­tween the min­istries of fi­nance, com­merce, agri­cul­ture, in­dus­try and con­struc­tion.

“They need to meet as soon as pos­si­ble be­cause they are di­rectly con­cerned [with for­eign ex­change] and so they need to ne­go­ti­ate with the Cen­tral Bank,” U Aung Ko Ko said.

Myan­mar re­mains heav­ily re­liant on im­ports across a host of sec­tors, which is un­likely to change in the next few years. U Kyaw Kyaw Hlaing, chair and CEO of Smart Tech­ni­cal Ser­vices, said the grow­ing de­mand for dol­lars will con­tinue to put the kyat un­der pres­sure. All govern­ment min­istries will have to co­op­er­ate to help in­crease, and man­age, the in­flow of for­eign cur­rency earn­ings, he added.

At a meet­ing in Nay Pyi Taw on Oc­to­ber 31, Pres­i­dent U Htin Kyaw ad­dressed the is­sue of ex­change rate volatil­ity and said the govern­ment was pre­par­ing to ac­cel­er­ate mone­tary pol­icy re­form. The pres­i­dent also pointed to high in­fla­tion, which he blamed on con­sec­u­tive deficits.

The IMF’s deputy divi­sion chief for Asia and the Pa­cific, Yongzheng Yang, said dur­ing a visit last month that the coun­try’s fis­cal deficit had in­creased since the fund’s mis­sion the pre­vi­ous year, and that he ex­pected the cur­rent ac­count deficit to “rise con­tin­u­ously” for some time.

The fund also said it was im­por­tant that the Cen­tral Bank main­tain a flex­i­ble ex­change rate, rather than try­ing to keep the kyat ar­ti­fi­cially stable.

“To con­tain high in­fla­tion and strengthen its ex­ter­nal po­si­tion, Myan­mar needs to keep the fis­cal deficit in check, tighten mone­tary con­di­tions and al­low the ex­change rate to move more flex­i­bly,” the IMF said.

‘They need to meet as soon as pos­si­ble be­cause they are di­rectly con­cerned.’

Aung Ko Ko Econ­o­mist

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