Following the daily fluctuation of Myanmar's exchange rate over the past three months, economists and business people have urged the government to urgently address the problem of violatility.
Economist Maung Aung said the Central Bank of Myanmar (CBM) must come up with effective measures to rein in the forex market, in order to create a conducive environment for businesses, particularly those involved in foreign trade.
On August 2, CBM set the reference exchange rate of kyat for account transactions against the US dollar at 1,429 kyats for $1. On the same day last month, $1 was equal to 1,399 kyats, 45 kyats higher than that of June. The reference rate has increased more than 100 kyats per dollar, when compared to the rates in April.
“For our economy to grow further, market stability is the key. If the exchange rate fluctuation goes on, it will be hard for people to do business here,” he said.
“It (forex instability) has yet to have huge impacts on Myanmar's growth and outlook, in terms of macroeconomics. But given the rise in commodity prices, it may have some impacts on the micro level, mainly end users. So, we need to maintain market stability."
According to the economist, CBM urgently needs to set proper measures to control the fluctuating rate, particularly the depreciation of kyat against the dollar. This is the only way to ease inflationary pressures, he said.
“We need to heal the wound before it gets worse,” he said.
He said striking the trade balance between imports and exports as well as stabilisation of market rates would help curb inflation.
Aye Thaung, president of Shwe Lin Pan Industrial Zone, urged the government to take into consideration the interest of enterprises and factories.
“Authorities need to get accurate data and see the truth. We sincerely want them to come and see the situation on the ground. Given that the costs become higher, we all are now struggling for survival. How can we expect to expand our business in such a difficult situation?” he questioned.
“We (business people) are not worried about making losses. A business will either win commercial profits or lose its investment. It is a universal truth. Our main concern is that things will be more difficult for us to do business here,” he said.
Outbound tourism hit
If the government fails to curb inflation in time, then all lines of business will be in trouble, resulting in a lack of job opportunities and declining investor confidence, he warned.
Sabei Aung, managing director of Nature Dream Travels and Tours Co, said the forex instability has severely impacted the nation's outbound tourism market.
“The sales of outbound tours have significantly decreased due to the kyat’s depreciation against the dollar. People now think twice before visiting other countries, as it will cost them much more to go abroad. So, most have decided to postpone their plans for leisure trips, saying they will go abroad only when the kyat rises against the dollar," she said.
She said the firm could sell only a few outbound tours during the long vacation this month. She urged policy makers to review the monetary policy and urgently curb inflation in order to restore stability in the market.
Yet, the auto industry has yet to suffer the negative impacts from inflation, according to SoeTun, president of Myanmar Automobile Manufacturers and Distributors Association and managing director of Farmer Auto Trading Co.
“Unlike food products, it usually takes time to sell a car here. Auto showrooms need to invest in a wide range of imported cars for quite a long time. Though kyat depreciation hits importers, it has not yet brought severe impacts on the auto industry as a whole,”he said.
Aung Soe, director general of Myanmar Trade Promotion Organisation, said the authorities are making efforts to improve export volume, so Myanmar can reduce its long-standing trade deficit.
The official considers Myanmar's forex instability as an impact from the trade war between the United States and China. He urged local businesses to try hard to reap some benefits from that.
“It is a favourable environment for our exporters because they earn more. In order to ensure kyat depreciation does not hurt our trading activities, we are now encouraging local businesses to produce value-added products and export them to other countries more than ever,” he said.
Myanmar now focuses on improving exports in core areas such as rice, beans, forestry products, rubber, garment and textile, fruits and vegetables, agro-food processing, ICT products as well as e-commerce in line with its national export strategy, which is now in the phase of a mid-term review. The strategy will be updated every five years, he added.