Local currency depreciation is not a good sign, and the volatility of currency exchange rate is also crucial for trade and foreign investments, said Soe Min, Deputy-Governor of the Central Bank of Myanmar. 

Deputy-Governor Soe Min yesterday submitted the report on monetary policy and the monetary volatility for 2016-17 FY and 2018-19 FY, at the session of Union Parliament  on September 9. 

The central bank fixed the official exchange rate at Ks five per US dollar before 2012. The price of a dollar at the outside market was around Ks 700 to Ks 800. In some years, the price of a dollar exceeded Ks 1,000. Since April 2, 2012, the Central Bank of Myanmar introduced Managed Float Exchange Rate Regime in order to fix the suitable rate for huge variances of exchange rates, he added. 

“The central bank introduced the foreign currency auction system in order to fix the reference rates similar to those in the market and control  the foreign currency market. The central bank fixes the reference rate based on the exchange rate proposed for the auction and the exchange rates in the local and foreign markets. After that, the central bank shifted to the fixing of weighted average exchange rate calculated on the exchange amounts in the interbank markets. In addition, the central bank plans to implement the rule-based interventions framework in order to lessen the huge gap in foreign currency exchange rates,” he continued. 

In addition, the currency exchange rate depends on increased imports of products. The actual inflow of export earnings into the country lies at the core of  foreign currency stability. So the local currency depreciation largely relies on the ownership of foreign reserve funds and macro-economy like economy, finance and monetary. The central bank is negotiating with relevant ministries on the policies, he added. 

In the future, the central bank will fix the single policy interest rate. It can enable private banks to fix their interest rates freely through the step-by-step relaxation of interest rates. The central bank is implementing it with the help of the International Monetary Fund (IMF), he said. 

The volatility of monetary system is one of the core objectives of the central bank. For the volatility of monetary system, the central bank is carrying out the supervision and inspection of monetary organizations by laying down the rules for them.