Burma’s Central
Bank will implement a managed, floating exchange rate in the country on Sunday
designed to integrate its economy with other nations’ currency.
The foreign exchange rate will be published daily by the Central Bank,
said the New Light of Myanmar, a state-run newspaper.
Replacing the official exchange rate, which has been pegged since 1977
at the level of 8.5 kyats is the first step toward unifying various currency exchange
rates and for allowing room for the Central Bank to influence the market
exchange rate.
A team lead by the International Monetary Fund is now at work helping
Burma modernize its financial structure.
Mizzima reported in January that Meral Karasulu, the deputy division
chief of the Asia and Pacific Department at the International Monetary Fund,
who led the IMF assessment team, said in a statement: “Burma has a high growth
potential and could become the next economic frontier in Asia, if it can turn
its rich natural resources, young labor force, and proximity to some of the
most dynamic economies in the world, into its advantage.”
Modernizing Burma’s economy would require changes to enhance the
business and investment climate, modernizing the financial sector, and further
liberalizing trade and foreign direct investment, she said.
She noted that the parallel market exchange rate of the kyat has
appreciated by about 32 per cent in nominal effective terms since
end-FY2009/10. The appreciation pressures are primarily due to large foreign
inflows into the economy, which cannot find an outlet due to exchange
restrictions on current international payments and transfers, she said.
She noted that technical work by the Central Bank of Myanmar (CBM) was
already under way to establish the necessary market structure. Ultimately, the
unification of the exchange rate would require moving away from the “export
first” policy, she said.
In light of the appreciation pressures, she said certain exchange
restrictions can be removed immediately, for example, by allowing the use of
all foreign currency bank account balances for imports, easing import licensing
requirements and access to the newly established foreign exchange retail
counters.
“A successful exchange rate unification would require improvements in
all areas of macroeconomic management,” she noted. “This will have to start
with establishing a monetary policy framework to focus on price stability. The
authorities’ plan to grant operational autonomy and accountability to CBM is a
welcome first institutional step towards this goal.”
Mizzima News
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