Clar­ity com­ing on for­eign ex­change pol­icy

The Myanmar Times - - Front Page - HTIN LYNN AUNG htin­lyn­naung@mm­

A com­mit­tee formed to deal with ex­change rate volatil­ity will pub­lish pol­icy de­tails in state me­dia amid calls for pub­lic an­nounce­ments on what ac­tion au­thor­i­ties are tak­ing.

A NEW govern­ment-Cen­tral Bank joint com­mit­tee set up to deal with ex­change rate volatil­ity will in­form the pub­lic of pol­icy mea­sures through state me­dia, amid grow­ing calls for the bank to pro­vide clar­ity on its ef­forts.

The joint-co­or­di­na­tion com­mit­tee will make “pub­lic aware­ness” state­ments, which in­clud­ing de­tails of poli­cies to be adopted by the Cen­tral Bank and the govern­ment to deal with ex­change rate volatil­ity, said U Maung Maung Win, deputy min­is­ter at the Min­istry of Fi­nance and Planning, who chairs the com­mit­tee.

Bank­ing sec­tor of­fi­cials and mem­bers of the Na­tional League for Democ­racy’s Eco­nomic Com­mit­tee are push­ing for the Cen­tral Bank to make pub­lic an­nounce­ments on the ex­change rate is­sue and its wider ef­forts to de­velop Myan­mar’s fi­nan­cial sec­tor.

The kyat has weak­ened steadily over the last few months and the Cen­tral Bank’s ref­er­ence rate rose to K1295 yes­ter­day – K16 shy of the his­toric high reached in De­cem­ber last year.

There are di­vi­sions within the busi­ness and fi­nance com­mu­nity over just how much the Cen­tral Bank could, or should, do to stem the kyat’s slide. A lack of in­ter­na­tional re­serves has made it re­luc­tant to de­fend the kyat in the past, and in­ter­na­tional ad­vis­ers like the IMF are urg­ing the au­thor­i­ties to let the cur­rency fluc­tu­ate freely.

But the Cen­tral Bank has come un­der fire from sup­port­ers and de­trac­tors for its si­lence in the face of kyat volatil­ity.

U Ye Min Oo, a mem­ber of the NLD’s eco­nomic com­mit­tee, said that the Cen­tral Banks was ad­dress­ing the ex­change rate is­sue and push­ing on with fi­nan­cial sec­tor de­vel­op­ment. The govern­ment’s Na­tional Eco­nomic Co­or­di­na­tion Com­mit­tee in­cludes se­nior Cen­tral Bank of­fi­cials, and the is­sues are be­ing dis­cussed, he added.

“It is not true that the Cen­tral Bank is do­ing noth­ing,” he said. “But the bank has to re­veal what ini­tia­tives it’s tak­ing when the ex­change rate is not stable by form­ing news an­nounce­ment teams. It needs to step for­ward.”

U Soe Thein, a for­mer deputy di­rec­tor gen­eral in the bud­get depart­ment of the Min­istry of Planning and Fi­nance, said it would be dif­fi­cult for the Cen­tral Bank to solve the cur­rency volatil­ity is­sue, be­cause the weak­en­ing ex­change rate is driven in part by trade and bud­get deficits.

The IMF has also pointed to per­sis­tent trade deficit and bud­get deficits – with the lat­ter con­tribut­ing to higher in­fla­tion – as putting pres­sure on the kyat.

“There are many mat­ters that can’t be solved by the Cen­tral Bank alone in im­prov­ing the fi­nan­cial sec­tor,” said U Soe Thein. “But I can’t un­der­stand why the Cen­tral Bank doesn’t tell the pub­lic what it can and can­not address, and what it’s fo­cus­ing on.”

U Mya Than, chair of Myan­mar Ori­en­tal Bank, said a key is­sue is that large vol­umes of cur­rency are ex­changed on the in­for­mal mar­ket, which leads to a short­age of dol­lars in the for­mal mar­ket and pushes down the kyat’s value.

The fi­nan­cial sec­tor “is not putting all mat­ters on the Cen­tral Bank”, but the in­dus­try needs to know what the Cen­tral Bank is do­ing to com­bat the prob­lem, U Mya Than said.

“It’s time to do things in a trans­par­ent way,” he said.

The IMF’s deputy divi­sion chief for Asia and the Pa­cific, Yongzheng Yang, said dur­ing a re­cent brief­ing on Myan­mar’s progress on eco­nomic re­form that the au­thor­i­ties’ aim is to grad­u­ally draw the in­for­mal mar­ket into the for­mal. But the size, opac­ity and long his­tory of the in­for­mal mar­ket mean this will take years, he said.

U Win Thaw, di­rec­tor gen­eral of the Cen­tral Bank’s For­eign Ex­change Man­age­ment Depart­ment, said the Cen­tral Bank can­not stop the dol­lar ap­pre­ci­at­ing against the kyat, but there are mea­sures it can take to make the moves more stable. The bank needs to ex­am­ine im­port and ex­port earn­ings closely, and make sure that ex­port earn­ings are pro­cessed through the for­mal fi­nan­cial sec­tor, he said.

– Ad­di­tional re­port­ing by Chan Mya Htwe + Trans­la­tion by San

Layy and Win Thaw Tar

‘The Cen­tral Bank has to re­veal what ini­tia­tives it’s tak­ing.’

U Ye Min Oo NLD Eco­nomic Com­mit­tee

Photo: Zarni Phyo

Peo­ple walk past a money changer on Bo­gyoke Aung San Road.

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