A committee chaired by officials from the Myanmar Finance Ministry and the central bank has been created to deal with exchange rate volatility.
Set up in October, the group is chaired by Maung Maung Win, deputy minister for finance and planning, and Set Aung, deputy governor of the Central Bank of Myanmar. Senior officials from various state-owned enterprises and the Financial Regulation Department also sit on the committee, Maung Maung Win told the Myanmar Times.
The “joint coordination committee” will work with government ministries, such as the Ministry of Construction and the Ministry of Industry, which supervise sectors heavily reliant on foreign exchange, are actively involved in import-export operations, or help set trade policy, Maung Maung Win said.
State-owned enterprises that are involved in foreign exchange transactions, such as the state-owned banks that dominate the local market for foreign currency accounts or firms with foreign exchange earnings, will also be involved, he added.
Maung Maung Win said the committee was responsible for submitting suggestions and policy advice to the finance ministry and the central bank. Although the committee has only met once thus far, it has already provided some initial suggestions, he said.
Maung Maung Win would not comment on the details, but said he expected an official policy response from the government soon.
Myanmar companies, banks and businesspeople have been calling on the government to address the exchange rate issue for years. Currency volatility is common in developing countries, particularly those like Myanmar that are in the process of opening up the economy to foreign investment.
But the business community believes that a coordinated effort from the authorities could still lessen sharp swings in the value of the kyat, which has weakened 10% against the dollar since July.
Economist Aung Ko Ko told the Myanmar Times that cooperation among government ministries was a matter of urgency, in particular between the ministries of finance, commerce, agriculture, industry and construction.
“They need to meet as soon as possible because they are directly concerned [with foreign exchange] and so they need to negotiate with the Central Bank,” Aung Ko Ko said.
Myanmar remains heavily reliant on imports across a host of sectors, which is unlikely to change in the next few years.
Kyaw Kyaw Hlaing, chair and CEO of Smart Technical Services, said the growing demand for dollars will continue to put the kyat under pressure. All government ministries will have to cooperate to help increase, and manage, the inflow of foreign currency earnings, he added.
At a meeting in Nay Pyi Taw on Oct 31, President Htin Kyaw addressed the issue of exchange rate volatility and said the government was preparing to accelerate monetary policy reform.
The president also pointed to high inflation, which he blamed on consecutive deficits.
The International Monetary Fund’s deputy division chief for Asia and the Pacific, Yongzheng Yang, said during a visit last month that the country’s fiscal deficit had increased since the fund’s mission the previous year, and that he expected the current account deficit to “rise continuously” for some time.
The fund also said it was important that the central bank maintain a flexible exchange rate, rather than trying to keep the kyat artificially stable.
“To contain high inflation and strengthen its external position, Myanmar needs to keep the fiscal deficit in check, tighten monetary conditions and allow the exchange rate to move more flexibly,” the IMF said.