Economy: Myanmar to float currency; BRICS summit on trade, the West and creating a multilateral bank

Updated On: Mar 30, 2012

Myanmar’s currency to be unified on April 1

Myanmar is set to float its currency beginning April 1, a decision the Central Bank of Myanmar (CBM) announced on Wednesday. The move is seen as a major step in economic reform, as it will abolish the multi-layered exchange rate regime that has been a key deterrent for foreign investors for decades.

Under Myanmar’s current foreign-exchange system, the official exchange rate is 100 times more valuable than the black-market rate. The reform will see the kyat as “managed” and “determined by supply and demand” from April 1 onwards, which will “gradually eliminate restrictions on current international payments and transfers abroad”. The CBM will also publish a reference exchange rate every day. Unifying the country’s multiple exchange rates will make it easier for businesses and the government to handle the accounting and the conversion of money.

Yet, some analysts believe floating the currency could result in an unstable exchange rate or may strengthen the currency to an extent whereby it will hurt Myanmar’s relatively nascent export sector if the Myanmar government does not know how to handle the financial reform properly. However, experts from the Malaysian and Thailand central banks have been roped in to help with the transition.

As of yet, the exact value of the kyat when it is floated on Sunday is not known. It is also unclear when foreigners will be able to trade the currency in significant sums. According to bankers and officials, the general consensus is that the kyat will be set between 800 kyat and 820 kyat to the US dollar, which is close to the prevailing black-market rate.

Director General of the Ministry of Energy’s Energy Planning Department Htin Aung said that the government will use “800 kyat per US dollar for the time being” but will introduce “more exchange rate modifications to come”.

Report: Myanmar’s central bank says currency to float from April [Reuters, 28 March 2012]

Report: Myanmar will unleash its currency [Wall Street Journal, 28 March 2012]

4th BRICS Summit

Leaders of Brazil, Russia, India, China and South Africa – also known as the BRICS emerging economies – met in New Delhi on Wednesday for its fourth summit. One of the issues that topped the agenda at the meeting was the creation of a tentatively-named “BRICS Bank” that would fund development projects and infrastructure in developing nations. The bank, still in its planning stages, intends to rival other multilateral lenders such as the World Bank and the Asian Development Bank.

In addition, the BRICS group wants the West to give developing nations greater control over the International Monetary Fund. The US have yet again proposed its own candidate for president of IMF, despite calls for the leadership to go to someone from a developing country. According to the group, the West’s lax monetary policy was the major cause for “excessive volatility in capital flows and commodity prices”. Its leaders were expressively unhappy with the West’s control over the global financial system and outlined measures to reduce their dependence on exports to the developed world. The measures included an agreement between the BRICS nations’ development banks to extend credit facilities in local currencies.

The countries also hope to increase Intra-BRICS trade, which expanded by 28 percent last year to $230 billion. It is expected to grow to $500 billion by 2015. Other issues, such as existential problems within the BRICS group were raised at the summit as well. For example, tensions between India and China over territorial disputes and China’s massive trade surplus with India have been said to reduce the body’s effectiveness.

The “Dehli Declaration”, which was signed at the end of the summit, mentioned Iran’s nuclear energy policies, saying that they recognized Iran’s “right to peaceful uses of nuclear energy”. It, too, referred to the leaders’ “deep concern” over the Syrian crisis and called for an end to the violence.

Report: BRIC summit focuses on new development bank [Channel NewsAsia, 29 March 2012]

Report: High-growth nations criticize West [Wall Street Journal, 30 March 2012]

Report: BRIC leaders fail to create rival to World Bank [New York Times, 29 March 2012]

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