Overcoming the challenges posed by fluctuations in foreign exchange rates is a significant endeavour. The US dollar serves as the dominant international currency, accounting for over 60 per cent of global trading. Given its widespread use in investments and currency circulation worldwide, changes in foreign exchange rates have a profound impact on the economic landscape.
In Myanmar, the disparity between the foreign exchange rate set by the Central Bank of Myanmar and the rate outside the official channels is causing concern among importers, individuals involved in US dollar transactions, local businesspeople, foreign investors, and entrepreneurs. The daily fluctuations in the forex rate of the US dollar have created an atmosphere of uncertainty.
In a recent report, the World Bank highlighted the ongoing challenges faced by Myanmar’s economy. While the foreign exchange rate remained relatively stable during the past six months, allowing businesses to operate smoothly, other issues such as power outages, internal conflicts, declining household incomes, escalating prices of essential food items and fuel, and limited job opportunities have created a critical situation for Myanmar’s economic recovery, exacerbated by the devaluation of the Myanmar kyat.
To stabilize the forex rate of the US dollar, the CBM has intervened by selling hundreds of US dollars. However, these efforts have had limited success in significantly impacting the forex rate. Consequently, the depreciation of the local currency has led to increased prices of imported goods, including essential items such as fuel, cooking oil, construction materials, medicines, and agricultural inputs.
Recently, the forex rate of the US dollar soared in the domestic market after the United States imposed restrictions on two international banks in Myanmar. Presently, the CBM has set the official currency exchange rate at K2,100 per US dollar, while the off-the-counter rate has reached approximately K3,100 per USD.
The fluctuation of foreign exchange rates can have far-reaching implications for the overall economic arena. It is crucial for business owners to have a conducive environment to conduct their operations, as their success contributes to the long-term development of the state. Although there are existing laws and regulations pertaining to foreign exchange management measures, some restrictions are not effectively implemented in practice.
In a recent report, the World Bank highlighted the ongoing challenges faced by Myanmar’s economy. While the foreign exchange rate remained relatively stable during the past six months, allowing businesses to operate smoothly, other issues such as power outages, internal conflicts, declining household incomes, escalating prices of essential food items and fuel, and limited job opportunities have created a critical situation for Myanmar’s economic recovery, exacerbated by the devaluation of the Myanmar kyat.
Addressing the challenge of forex changes requires concerted efforts from policymakers, regulators, and market participants. Implementing effective measures to stabilize the foreign exchange rate, improving the enforcement of existing regulations, and addressing underlying issues that hinder economic growth are crucial steps towards mitigating the adverse impacts of forex fluctuations and fostering a more robust and resilient economic environment.
