Myanmar central bank says FX deposits must be converted into local currency

Myanmar central bank says FX deposits must be converted into local currency

People line up outside a bank to withdraw cash in Yangon on May 13, 2021. (Reuters photo)
People line up outside a bank to withdraw cash in Yangon on May 13, 2021. (Reuters photo)

Foreign exchange earned by locals in Myanmar must be deposited in accounts at licensed banks and exchanged for the local currency within one working day, the central bank said, as the country's military authorities seek more control over foreign currency flows.

In a notification dated April 3 and published in state media on Monday, the central bank said it would issue exemptions to the new rule separately and that foreign currency transferred abroad should be done via the licensed Foreign Exchange Trading banks.

The order, signed by Central Bank of Myanmar Governor Than Nyein, would also apply to foreign currency that came into the country before Sunday, according to the notification. It said those who did not comply would face legal action under the Foreign Exchange Management law.

Myanmar's economy has slumped since the army overthrew an elected government more than a year ago and launched a bloody crackdown on opponents, with a struggle to impose order amid widespread civil unrest and armed resistance from pro-democracy militias and ethnic minority rebels.

Last year, the central bank briefly tried tethering the kyat currency to a reference rate against the dollar after a slump in the exchange rate.

In March, Myanmar authorities announced a plan to start accepting the Thai baht currency for settling border trade transactions in order to reduce dependence on the dollar and reduce inflation pressures.

That announcement, issued by the ministries of information and investment, also said there was a similar plan to use the Indian rupee for such trade after an earlier agreement to accept China's renminbi.

The latest central bank order prompted questions in a group on social media used by Myanmar residents to facilitate trade in currencies over whether money converted into kyat would be put in special accounts and whether these could be accessed.

A Myanmar resident, who asked not to be named for security reasons, expressed concern about being able to access their deposited savings and how much could be withdrawn.

"If we can't withdraw, everything we earn will be stuck in the bank," the resident said.

The official central bank exchange rate for the kyat is currently 1,850 per dollar, but this tends to be well below the unofficial black market rate.

A spokesperson for the central bank did not immediately respond to a request for comment.

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