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MYANMAR – The junta council announced on December 5 that the USD exchange rate, which was previously set at a fixed rate of 2,100 kyats per USD, shall be rescinded and the exchange rate will be set at market rate.
After issuing countless policies regarding the exchange rate since the military coup, the junta council has now announced that its central bank will no longer decide the exchange rate of foreign currency and that the rate will be freely set by the currency exchange businesses and customers.
Business owners believe that this latest announcement by the junta regime is due to the junta council running out of USD reserves and that it will lead to further inflation with the USD exchange rate climbing higher while the value of the kyat depreciates.
“They (junta council) are running out of USD reserves and can no longer sell the currency to the import businesses at the fixed rate. That’s why they set the exchange rate at the market rate. They essentially can no longer supply USD,” said a Yangon-based businessman.
There is a fuel shortage all over the country, and the junta’s USD deficit could lead to a further drop in the value of Myanmar kyat and cause commodity prices to rise, some businesses suggest.
The USD exchange rate in the market on December 5 was above 3,500 kyats, but the market wasn’t able to open on December 6. Meanwhile, the exchange rate of Thai Baht hiked to 97 Kyats per Baht.
Economist Sean Turnell analyzed that the junta council suddenly dropping the fixed exchange rate shows that it can not supply USD to the sectors where it previously provided USD supply. Professor Turnell continued that the junta council can no longer control finances, ideas, or finances, and that all these signs clearly point in a single direction.