The root cause of high inflation rate in the third quarter of 2018-2019 fiscal year, is linked to high commodity prices and consumer price indexes, said Soe Thein, Vice-Governor of the Central Bank of Myanmar at the regular session of Lower House Parliament yesterday (August 27).

The vice-governor replied to the question raised by Lower House MP Thant Zin Tun from Dekinathiri Constituency about the use of overseas banks in the local businesses and the measures taken for the control against inflation rate and the extension of investments by the monetary organizations in the private sector. 

There are two main reasons that cause the inflation in Myanmar. The first one is the moderate increase in budget deficit. The central bank has to take the loans to partly fill the budget deficit. An increase in currency amount may lead to inflation. There occurs the demand-pull inflation. 

The second point is linked to the fact that there is low foreign exchange reserves and high trade deficit. As the local currency depreciates against the foreign currencies, the country has to rely on imports. As a result, the prices of import products become high. The high prices of import products have an impact on inflation. There occurs the cost-pull inflation, he added. 

The average inflation rate calculated using 2012 as a base year was 6.81 per cent and the year-on-year inflation rate, 7.0 per cent, in 2016-2017 FY and the average inflation rate, 4.03 per cent and the year-on-year inflation rate, 5.42 per cent, in 2017-2018 FY. 

In June in 2018-2017 FY, the average inflation rate was 8.08 per cent and the year-on-year inflation rate was 99.51 per cent. 

Since January, 2019, the currency exchange rate was stable. The local currency value declined to 7.8 per cent in late June compared with the same period last year. But the year-on-year inflation became higher moderately, he continued.