Myanmar’s shadow government flags deepening economic turmoil
Myanmar’s military regime has resorted to printing money to finance its defence operations, spurring inflation
MYANMAR’S collapsing currency, plummeting dollar reserves and soaring inflation are pushing the economy deeper into crisis, estimates by the shadow National Unity Government (NUG) show.
The kyat has plunged almost 70 per cent against the dollar since 2021, foreign-currency reserves have dropped to about US$3.8 billion or lower, inflation has stayed at double digits, according to Tin Tun Naing, the shadow government’s minister for planning, finance and investment.
The information from the NUG in a briefing late on Monday (Jun 3) that was attended by foreign media and United Nations officials offer more recent gauges on Myanmar’s economic conditions in the absence of timely official data. The military regime last provided data in January for the fiscal year that ended in March 2023, saying that gross domestic product growth was 3.4 per cent for the period, that dollar reserves were at US$12.1 billion and inflation was 24.4 per cent.
Junta spokesman Major General Zaw Min Tun didn’t immediately respond to calls and text messages from Bloomberg News seeking comment on the NUG’s estimates.
Myanmar’s military regime has resorted to printing money to finance its defence operations, spurring inflation, the NUG’s Tin Tun Naing told the briefing. Remittances from nationals working overseas have declined by about 50 per cent in recent months from a monthly average of about US$100 million, he said. A possible full sanction by the Financial Action Task Force later this month will increase pressure against the junta’s finances, he said.
The shadow group mainly composed of lawmakers who escaped after the 2021 coup against a civilian government led by Aung San Suu Kyi is aligning themselves with ethnic armed forces fighting against the junta, the NUG official said. The military regime had been losing ground in the past year, hit by defections.
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Escalating clashes risk extending the state of emergency that the ruling junta has imposed since 2021, and further derail its pledge to hold an election.
Instability is “partly driving the collapse in the exchange rate and it’s driving the country’s inflation rates, which are dramatically higher than any other country,” according to Sean Turnell, who previously advised the jailed ex-leader Suu Kyi and remains an economic consultant to the shadow government. He said 70 per cent of the budget deficit was simply financed by money printing, taking its toll on the currency.
“That’s partly driving the collapse in the exchange rate and it’s driving the country’s inflation rates, which are dramatically higher than any other country,” he said.
He blamed the junta’s creation of multiple exchange rates for kyat’s plunge, subsequently bringing gold prices up as citizens opt to buy the precious metal and the dollar, if they can.
While the Central Bank of Myanmar has kept the exchange rate at 2,100 kyat per dollar, it’s using an average rate of 3,340 kyat on its online trading platform and has allowed an average rate of 3,520 kyat for remittances. At the same time, gold prices are 16 per cent higher than the official reference rate of 487,100 kyat per tical, a unit of measurement used in Myanmar.
“The market certainly won’t collapse but it could be forced underground,” Turnell said of the foreign-currency market.
The junta announced on Tuesday it’s taking action against those who made dollar and gold prices unstable by arresting manipulators and issuing arrest warrants to some money changers and gold shop owners. BLOOMBERG
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