CBM revises percentage of Central Bank Deposit Account (CAB) and cash held by banks

The Central Bank of Myanmar announced on 3 October 2022 that it has revised the percentage of the Central Bank’s Deposit Account (CAB) and cash held by banks to reduce inflation.
Like the rest of the world, Myanmar also faces rising inflation due to rising fuel prices and rising foreign exchange rates due to the Russia-Ukraine war, through rising food and other commodity prices, it said.
To reduce the current rate of inflation, the central bank said that the minimum reserve requirement ratio (MRR) is to be raised in two ways, but considering the profitability of the banking sector, the current minimum reserve ratio – three per cent in Myanmar Kyat is unchanged.
In the minimum reserve requirement ratio, the ratio of the central bank’s deposit account (CAB) and cash held by banks (Cash) has been increased from 2.25 per cent to 2.5 per cent, and the ratio to be kept with cash has been reduced from 0.75 per cent to 0.5 per cent.
The CBM said that due to such excess, the cash in the possession of the banks will enter the deposit account at the Central Bank, which will reduce the circulating consumption currency (CIC) and control inflation.
If the banks are unable to expand their credit due to the increase in the cash held by the banks, interest will be paid on the average excess CAB, which is more than the minimum reserve requirement in Myanmar kyats.
The CBM stated that they are also preparing to issue and sell the Central Bank Securities Certificate (CBM bill) to control inflation.
To stabilize the exchange rate, the CBM has taken measures to temporarily lend US dollars to importers of fuel, allow export earnings to return, sell mandatory imports in US dollars, and pay for imports in US dollars as well as other currencies (RMB, Thai currency). — TPT/GNLM