Myanmar's central bank has started a slow depreciation of its kyat currency in an effort to stabilize fluctuations by bringing the official exchange rate closer in line with the market rate, a senior central bank official said on Thursday. The move, effective since Monday, follows suggestions by experts including those from the International Monetary Fund (IMF). Myanmar introduced a managed float of the kyat in 2012 to try to end the disparity between official and unofficial exchange rates.
The move was the first significant economic reform by the semi-civilian government that took office a year earlier, but the differences between unofficial and official exchange rates began to widen last month, with a scarcity of dollars in the market. The official exchange rate has slid from 1,200 kyat to the dollar on Monday to 1,216 on Thursday. At trading kiosks around Yangon the dollar was offered at 1,230 kyat. Foreign currency trading is permitted within a range of 0.8 percent above or below the official reference rate. "Frankly, our measure isn't meant to make the kyat stronger but to just help stabilize the exchange rates in the market," said a senior central bank official, who asked not to be named because he was not authorised to speak to the media.
"We believe the depreciation will also work gradually despite some immediate impacts on gold and other things." U Htwe, a senior official from the private United Amara Bank, welcomed the move by the central bank but said further efforts were needed to shrink the country's wide trade deficit. "We need to boost the exports and cut down the imports, especially that of non-essential things like luxurious food, utilities and liquors," he said.
Driven by rapid economic expansion, Myanmar's trade deficit jumped 88 percent in the fiscal year that ended on March 31. Myanmar imported more than $16 billion of goods in fiscal year 2014/15 and exports totalled more than $11 billion, leaving a deficit of more than $4.9 billion, according to official data. The central bank began unrestricted sales of foreign currency at its own specified rate to help importers last month when the official and unofficial rates began to diverge.