CBM cannot control local currency depreciation effectively: critics

 

Central Bank of Myanmar (CBM) is unlikely to effectively control the greenback appreciation against local currency due to the lack of control over illegal currency exchange markets, a drop in foreign reserves and huge external debts, banking experts and economists have criticized.

Local currency has reached a record low. The value of US dollar is expected to hit up to Ks-1500.

There is a flow of about US$ five billion in illegal markets every year. There is a trade deficit of about US$ four billion in 2017-2018 FY and US$ one billion in the mini budget period. The country is likely to solve trade deficits with the use of US dollars from illegal markets. The country’s oversea debts have reached over US$ one billion within one year.  And the country has to repay over US$ 10 billion oversea debts in installment and foreign reserves amount to about 3.2 months of exports.

Than Lwin, former vice-governor of the CBM said: “There is a currency manipulation with the use of hot money from abroad. The CBM is unable to cope with it. We should blame the CBM as it has to control the market with the use of its reserve money and repay external debts. The fact that the CBM can solve it by selling dollars in the market is easy. In practice, it is not easy.”

In late May, the US dollar appreciated against Ks-1,351.  On August 13, the value of US dollar hit Ks-1475.

Some critics said that the local currency depreciation is the result of mounting trade war between China and the US. The currency depreciation is higher than those in other countries. The CBM needs to take actions against private banks which fail to abide by the rules as private banks’ currency exchange rates are higher than the CBM’s reference rates.

Economist Dr Aung Ko Ko said: “Local currency value will continue to depreciate. There are many reasons behind the currency depreciation. The country has less foreign reserve money. As far as I know, the foreign reserve money amounted to around US$ eight billion in around 2015. I don’t know the latest figures. But now the foreign reserve money is lower than that. The country is unable to export many products and faces flood disaster. There is no control over currency manipulation. The CBM is selling US$ 100,000 to private banks a day. I think all US dollars sold by the CBM will not go to the markets. The CBM needs to control it decisively with the law.”