Aug 2, 2011

Myanmar preparing for exchange rate readjustment

Myanmar is deliberating to readjust its official foreign exchange rate in a bid to stabilize domestic foreign exchange trading market, coordinating with related government departments on the move.

Myanmar Union Minister of Finance and Revenue U Hla Tun, in meeting with the Bank Administration Committee and the Bankers' Association in Nay Pyi Taw recently, stressed that the readjustment is aimed at facilitating the country's economic links with the international and development of domestic foreign exchange market.

He disclosed that a payment system development committee of the bankers' association will be formed with local and foreign experts and organizations to update the country's payment system.

A latest report also said Myanmar will coordinate with the International Monetary Fund (IMF) in the move which was disclosed after a workshop in this regard was held between Myanmar's Federation of Chamber of Commerce and Industry and the Central Bank.

Myanmar became a member of IMF and World Bank in 1952 but they suspended providing financial aid to Myanmar since 1987.

Myanmar's foreign exchange rate against U.S. dollar was traditionally designated as around 6 Kyats per U.S. dollar since 1975, while the market exchange rate fluctuated between 780 and 1, 000 Kyats per dollar for the past several years.

In face of the great gap between the official and market exchange rate, experts view that if suitable rate is officially readjusted, it will facilitate the work flow of economic entrepreneurs.

Early this month, U.S. dollar picked up a little in value in Myanmar after sharp drop and remained relatively steady against Kyat, exchanging at around 810 Kyats per dollar in the first half of this month but fell again in the second half to as low as 768 Kyats per dollar up to date, according to market survey.

U.S. dollar once fell sharply to as low as 780 Kyats per dollar in June from 820 Kyats per dollar in May.

The USD-Kyat exchange rate at between 800 and 900 Kyats per dollar had prevailed for half a year since December last year.

It started to fall from 900 kyats per dollar in early last December to 830 Kyats in the beginning of 2011 but it picked up to 900 Kyats again in late February. However, the rate kept falling to 820 Kyats until the end of May.

Exporters were affected due to the fall of U.S. dollar for the past six months' period.

Demand for USD did rise in Myanmar in August 2010 with the market exchange rate against Myanmar Kyat once standing at as high as 1,010 Kyats per dollar, However, it fluctuated until now.

Meanwhile, Myanmar economists have stressed the need to introduce sufficient number of money changers across Yangon's road corners as part of the efforts to promote tourism sector in the country.

Despite some improvement in Myanmar's tourist sector in the past and good prospects in the future, the difficulty of introducing such money changers may hinder the development of the sector, experts said, blaming that officially-opened public foreign exchange counters trading at the market rate in Myanmar are less than necessary as compared with abroad as most tourists depend most on them with trust.

At a time when depreciation of the value of U.S. dollar occurred, causing loss with exporters, Myanmar has cut commercial tax for exporters by 3 percent from 8 percent with income tax of 2 percent remaining unchanged starting July to encourage export and raise import.

The cut has made an exporter to have to pay commercial tax of 5 percent only plus 2-percent income tax totaling 7 percent instead of 10 percent previously for the undertaking.

Myanmar's foreign trade went up to 15 billion U.S. dollars in the fiscal year 2010-11 from 11.8 billion dollars in 2009-10, according to official statistics.

Source: Xinhua