Tamu trade halted
Myanmar traders on the Indian border say an Indian government recall of rupee notes is likely to halt trade until new currency circulates next year.
FOLLOWING a hugely disruptive demonetisation exercise by the Indian government, trade with India at the Tamu border area will only be able to restart next year once new rupee notes start to circulate, according to the Myanmar Tamu Border Traders Association.
Indian Prime Minister Narendra Modi, as part of an effort to stamp out corruption and fake currency, announced on November 8 that 500 and 1000 rupee notes, which account for over 80 percent of cash in circulation within India, would no longer be legal tender.
As Sagaing Region border trade with India is conducted using a mixture of rupee and kyat, the Indian government policy also brought business to a halt, Myanmar traders said. Indian traders delayed payment for goods received amid the fallout, and Myanmar traders holding millions of 500 and 1000 rupees notes were left wondering what to do with them.
U Khin Maung Tin, secretary of the Tamu Border Traders Association, said last week that Myanmar traders had been left holding around 210 million rupees (US$3.07 million; K3.95 billion).
Myanmar traders have since exchanged almost all their 500 and 1000 rupee notes with Indian traders near the border for a combination of kyat and other rupee denominations, said U Zaw Htay, chair of Nan Phar Lone Market near the Indian border in Sagaing.
The Indian government is allowing its citizens to exchange recalled rupees notes through banks and other official entities like post offices until the end of December.
But the recall has left both sides of the Indian-Myanmar border short of cash. U Khin Maung Tin said that border trade would only restart once new rupee notes start to circulate.
“We can’t make deals without money,” he said. “Circulation of money is an issue across India not just at the border. The Indian traders have no money to make purchases, so trading is expected to resume in January.”
U Zaw Htay said yesterday that Myanmar’s Tamu traders had gotten rid of around 70pc of their rupee holdings, and that money was still being exchanged. But traders are exchanging rupee notes at rates far less favourable than in October.
“Some [Tamu traders] sold their 500 and 1000 notes for 15 to 20 percent below [the previous] market price – and even 30pc,” said U Khin Maung Tin.
Traders at Nant Hpa Lon Market are also exchanging their rupees at below market prices, said U Khin Maung Cho, who is in charge of finance for the market.
Indian businesspeople had arrived at the border to purchase recalled rupee notes, but the informal market prices at which they bought were far lower than the official Myanmar Central Bank rate, he said.
The Central Bank rate equates to K1906 for 100 rupees, but Myanmar traders were exchanging 500 and 1000 rupee notes at a rate equivalent to K1600, he said.
The Tamu Border Traders Association submitted a request to the local Ministry of Commerce office to help solve the issue and help restart trade, U Khin Maung Tin told The Myanmar Times last week. U Khin Maung Tin also said his association had contacted the Indian consulate in Mandalay.
Shweta Singh, first secretary at the Indian Embassy in Yangon, told The Myanmar Times on November 29 she was not aware of any association have called the Indian embassy or Consulate. But the embassy was “in touch with the Ministry of External Affairs in New Delhi to examine the issue in consultation with the relevant Ministries in India,” she said.
Ms Singh did not respond to questions on whether the embassy was likely to offer assistance to Myanmar traders.
– Translation by Zar Zar Soe
Indian supporters of that country’s demonetisation policy wear masks showing the face of Prime Minister Narendra Modi.