Interviewed by Shin Min, Photo: Shwe Ko Lay
Having an exchange rate that is in accordance with the economic situation of Myanmar is important for the country. An interview with the Central Bank of Myanmar Monetary Policy Affairs and Financial Regulation Department Director General Daw Tin Moe Moe on the current status of the foreign exchange rate and work conducted to stabilise the rate:
Q. Let us know about the current status of foreign exchange rate.
A. In exchanging with US dollar, the Myanmar Kyat had depreciated since mid-June 2018. Other currencies also depreciated against US$.
The following table shows the depreciation of various currencies against US$.
|Currency||June 12, 2018||July 12, 2018||Depreciation (%)|
Q. What is the reason for this currency depreciation?
A. According to theory, short-term changes in the exchange rate depend on a country’s economic development rate, inflation, interest rate, ordinary account balance, capital account balance, changes in the world’s commodity prices and policy changes in major economic powers of the world, and these affect the local economy.
Long-term changes in the exchange rate depend on the stage of a country’s economic development, competitiveness in exports, foreign debt amount, the government’s budget deficit, investment inflow and local and foreign market prices. It also depends on a country’s political status and stability as well as encountering natural disasters.
The depreciation of the Myanmar kyat as well as other currencies against the US dollar is due to attempting to correct the trade imbalance from long-term trade deficit in US trade with China, the mutual taxation that reduces the world’s export value and other external factors.
Q. What are the ways in which the exchange rate can be stabilised?
A. It is important to have an exchange rate that is in accord with a country’s economic situation and stability. Attempting to control this depends on many economic situations. A country that has a possibility of economic development, has sufficient international reserves, has a surplus ordinary account or has a deficit for a short time only and has low foreign debt, such as Singapore, Malaysia, Korea and Thailand, were able to reduce their currencies’ depreciation.
When the situation of Myanmar was reviewed, the IMF had estimated 6.8 per cent growth in the economy of Myanmar in 2018-2019, so the country has a good possibility of economic development. Compared to other countries in the region, Myanmar’s foreign debt can’t be deemed high. But looking at trade, Myanmar was found to be running a deficit continuously.
As the country has limited international reserves, it is better to consider other ways to stabilise the exchange rate. When the Central Bank of Myanmar implements financial policy to stabilise its currency, in addition to interest rate policy, it is adjusting reserve requirements and conducting deposit auction
Q. Explain about the cooperation with ministries on stabilising the foreign exchange rate.
A. The Central Bank of Myanmar is cooperating and working with the Ministry of Planning and Finance and the Ministry of Commerce to stabilise the foreign exchange rate.