Myanmar’s currency reached an all-time low Friday, signaling growing concerns about the stability of a nation beset by civil unrest and teetering on the brink of a full-scale civil war, nearly eight months after the junta orchestrated a coup d’état.
The value of the kyat fell to 2,200 to the U.S. dollar—its lowest level in history—down from 1,330 on Feb. 1, when the military seized power from Myanmar’s democratically elected government. The cost of a tical of gold (0.578 ounces) soared to a new record of 1.9 million kyats, up from 1.3 million on the day of the coup.
In the more than seven months since, security forces have killed 1,108 civilians and arrested at least 6,591, according to the Bangkok-based Assistance Association for Political Prisoners (AAPP)—mostly during crackdowns on anti-junta protests.
The junta says it unseated Aung San Suu Kyi’s National League for Democracy (NLD) government because the party engineered a landslide victory in Myanmar’s November 2020 election through widespread voter fraud. It has yet to present evidence of its claims and public unrest is at an all-time high.
Amid the nationwide turmoil, the cost of basic goods has skyrocketed.
A housewife in Myanmar’s largest city Yangon, who spoke on condition of anonymity, told RFA’s Myanmar Service that the depreciation of the kyat and rising food prices are having a severe impact on daily life.
“In the first few months, things were not so difficult, but recently, the cost of commodities has risen out of control, and you can’t buy nearly as much as you could before the coup,” she said.
“When prices go up, the sellers can’t provide discounts like they once could.”
According to the housewife, the cost of coffee has risen by 50 percent, while prices for condensed milk, cooking oil, and rice have doubled.
Soe Tun, a businessman in Yangon, said the rise in commodity prices was the result of a twinned depreciation of the kyat and the appreciation of the dollar.
“A lot of people have been facing a hard time in the past few months—many have lost their jobs due to political instability and the COVID-19 outbreak,” he said.
“Unemployment is quite high. People have no income,but the prices of consumer goods has risen. Almost all medicines have had to be imported and paid for in U.S.dollars during the coronavirus pandemic and, as the U.S. dollar appreciates, everything costs more.”
Rising demand for dollar
The need for U.S. dollars has grown significantly since the military seized power, following a halt in exports and foreign direct investment. U.S. sanctions leveled against the junta have also stopped the flow of U.S. currency into the country.
The junta’s Central Bank sold a total of U.S. $144.8 million during the period from Feb. 3 to Sept. 15 to address the depreciation of the kyat against the dollar, according to the website Myanmar Now. However, money changers said that a rising number of foreign currency buyers has pushed the price of the U.S. up to meet the demand on the black market.
The Central Bank, which is trying to meet foreign exchange demands, issued a decree on Sept. 3, ordering local banks to sell their unused foreign currency to export banks at market prices within four months.
The depreciation of the kyat and soaring demand for U.S. dollars follows a World Bank report released at the end of July which said that the twin impacts of the military takeover and coronavirus pandemic could double the poverty rate in Myanmar, and suggested the economy is headed for a recession.
The Bank estimates that Myanmar’s economy will shrink by 18 percent between October 2020 and September 2021, pointing to domestic protests, labor shortages, telecommunications shutdowns, and a failing health sector as having the greatest impact.
Last month, a group of independent financial experts described the junta’s mismanagement of the country as “catastrophic,” and said it could spark a banking crisis.
Earlier this week, the shadow National Unity Government (NUG) estimated that the junta has lost some 2 trillion kyats (U.S. $1 billion) in revenue from its military-operated power company since February amid a widespread public boycott of the paying of electricity bills.
The junta’s Ministry of Electricity and Energy has acknowledged that it has had to purchase power from privately owned power plants to make up for shortfalls and warned that it would only be able to supply electricity to the country if the government can earn enough revenue.
Meanwhile, the military has stepped up offensives in remote parts of the country, triggering fierce battles with local People’s Defense Force (PDF) militias and some of the dozens of ethnic armies that control large swathes of territory along Myanmar’s periphery.
On Sept. 7, the NUG declared a nationwide state of emergency and called for open rebellion against junta rule, prompting an escalation of attacks on military targets by various allied pro-democracy militias and ethnic armed groups.
Need for urgent action
Joshua Kurlantzick, an expert on Southeast Asia with the Council on Foreign Relations, noted in an article Thursday that while prior to the pandemic, Myanmar’s economy was on track to expand by an additional six percent in 2019–20, the economy is now “imploding.”
“Many banks have little cash and many multinational companies have left Myanmar as trade relations have soured between leading democracies and the country,” he wrote, adding that the country had lost 1.2 million jobs in the second quarter of 2021.
He called for “rapid, concerted action, given the suffering inside Myanmar and the risks it poses to the world,” pointed to warnings by international experts that rising infections, population flight, and misgovernance threaten the country’s neighbors.
Zaw Pe Win, an economist in Yangon, told RFA that the junta must act to shore up the value of the kyat, or risk total collapse.
“The authorities are printing currency notes without any guarantees. The economic outlook is not optimistic and so domestic commodity prices will surely go up,” he said.
“If things continue in this fashion, low-income families are certain to face even harder times than they are now. If we cannot control the situation, the country will spiral downward uncontrollably.”
Reported by RFA’s Myanmar Service. Translated by Khin Maung Nyane. Written in English by Joshua Lipes.