By Blackpanda / MPA
Economists and businessmen said that the methods used by the State Administration Council (SAC) to tackle inflation relating to the dramatic decline of the value of Myanmar Kyat (MMK) are no more than administering folk medicine.
Even though the SAC arrested 10 gold businessmen who manipulated the price of gold in June, inflation and the dramatic rise of gold prices continued.
So, the Central Bank of Myanmar announced on 14 August that they would increase the interest rates of deposits and loans to tackle the situation.
“It is impossible to control inflation during their regime. The price of MMK will surely decline more because the international community doesn’t believe them. So, it doesn’t matter however they try to tackle for long term or short term, as long as they use methods like administering the folk-medicine,” a businessman said.
That dramatic decline in MMK value was caused by the increasing demand for the US dollar due to the lack of US dollar for imports and the SAC-controlled Central Bank tackled that problem with folk-medicine by selling 99 million dollars at the rate of 1 dollar for 3,400 MMK on 20 August.
A female professor of an economic university who joined the Civil Disobedience Movement (CDM) claimed that even though MMK value rose a bit after the sale of the Central Bank, it is likely to decline again due to the lack of trust by civilians and lack of long-term projects.
“The money deposited in the banks is invested in other businesses by them (bank owners). So, when people want to withdraw their money back, they have to limit the maximum withdrawal amount. When the withdrawal has a limit, people’s trust is declined. If this untrust is turned into the panic of bankruptcy of the big banks such as Kabawza Bank (KBZ) and Ayayarwaddy Bank (AYA), the financial situation of the country is likely to get worse,” the CDM professor explained.
She continued her explanation that printing more money by the SAC-controlled Central Bank to tackle the current financial crisis is absolutely a mistake.
“The Central Bank prints more money as the short-term cure. The inks on some money weren’t even dry yet. This kind of solution is unthinkably wrong and extremely dangerous,” the CDM professor said.
She said that people who understand business don’t deposit in the banks, they just buy another reliable foreign currency or gold or just invest in other businesses more.
“People lost their trust in banks and so bought other reliable currencies such as Dollar, Bath, or Yuan. As a result, the value of foreign currencies rises and MMK’s value declines over declines,” she told MPA.
She explained that the decline of MMK’s value is also associated with the suspended foreign investments due to political turmoil and civil war.
A broker from Mandalay said that the SAC is using the short-term remedies without planning for the long term even though prices of goods dramatically rose and the value of MMK was in decline after the coup.
“If the price of gold rises, they arrest businessmen who trade gold. They arrest businessmen whenever the price of the goods rises. They don’t have a solution to make the Myanmar currency reliable. Maybe they thought that if they arrested the traders the price would decline. They also don’t have a plan or policy for the economy of the country. They continued with the short-term cure to be stable for a while,” he explained.
Even though the exchange rate of US Dollar rose to a recorded high rate of 7,000 MMK per Dollar on 9 August, the current rate declined to around 5,500 MMK per Dollar due to selling US Dollars by the Central Bank as a short-term project.
Due to the high exchange rate of dollars and lack of dollars in traders’ hands, there were fuel shortages in August.
Banks can’t let their depositors withdraw as much as they want and civilians and businessmen are worrying about the collapse of the bank system due to the current situation of the country.
Financial Action Task Force (AFTF) also known as Groupe d’action finance’re added Myanmar to its “Blacklist” of high-risk jurisdiction in November 2022.
