By KYAW PHONE KYAW | FRONTIER
YANGON — The Central Bank has ordered all Myanmar citizens and companies to provide full details of any overseas-based bank accounts – seemingly a response to the recent depreciation of the kyat.
Central Bank Deputy Governor U Set Aung issued the notification demanding that details of the accounts be submitted by December 12.
The notification was sent to domestic banks on December 5. It states that the directors, officials and advisers to the banks have to submit information on their foreign bank accounts, including balances, and they must also inform their customers who have opened foreign-based bank accounts to do the same.
The Central Bank warned that anyone who fails to follow the notification would face potential charges under sections 38 and 42 of the Foreign Exchange Management Law enacted in 2012.
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Section 38 states that nobody is allowed to “engage in foreign exchange activities without a licence”, while section 42 stipulates a punishment of “up to three years imprisonment, or a fine, or both. Furthermore, the assets may be confiscated.”
U Win Thaw, director general of the bank’s Foreign Exchange Management Department, declined to comment on the notification when contacted by Frontier.
In a recent interview with the Myanmar Times, he said, that export income has been “kept abroad in offshore accounts, because of which exporters can claim they only received half of their actual export proceeds and keep the rest abroad. The owners of these accounts speculate on the dollar when the exchange rate shifts, so the value of the dollar has increased more than it needs to.”
The attempted clampdown comes as the local currency, the kyat, continues to slide against the US dollar. Since August 11, when the kyat was trading at K1275 to the dollar, the official rate has fallen by almost 5 percent to K1330. However, the kyat is trading much lower than the official rate on the outside market, at around K1385 to the dollar.
Salai Om Ki, a banking and finance expert with the Financial Sector Development (FSD) project run by GIZ (Myanmar), said it appeared that the December 5 notification was an attempt by the government and Central Bank to stem the kyat’s decline by controlling foreign currency flows.
He said the foreign-based accounts had an impact on the exchange rate because they hold export earnings. If these earnings were instead entering the country, they would help meet demand for foreign currency to pay for imports. He said that those with foreign accounts could also use them to “manipulate” the exchange market.
“In Myanmar, imports are higher than exports and this creates high demand for foreign currency. Some have opened bank accounts at abroad and this results in a decline in inflows,” he said.
“The authorities need to control these accounts because if the foreign currency price is high, it impacts on commodity prices and leaves low-income households vulnerable.”
The foreign currency accounts are in part a holdover from the era of sanctions, when transferring US dollars into and out of Myanmar was very difficult.
“Previous governments didn’t try hard to control [the foreign bank accounts] of sanctions, and also the Central Bank wasn’t an independent body. The current government has a willingness to control the [black market], and the Central Bank is more independent and stronger,” Om Ki told Frontier.
However, he questioned whether the Central Bank and law-enforcement bodies, such as the Bureau of Special Investigation, had the capacity to ensure compliance with the order. “The Central Bank can manage these issues gradually in the future, I think.”
Dr Sean Turnell, a specialist on Myanmar’s economy at Macquarie University in Sydney and an adviser to the NLD, said the concerns about the currency’s depreciation were “largely unwarranted”, and that in inflation-adjusted terms the kyat could still be seen as “slightly overvalued”.
Writing on Facebook, he said the US dollar had appreciated against most currencies since Donald Trump’s surprise election victory and that seasonal factors were also at play.
“Seen in this light, the decline in the US price of the kyat is not that dramatic at all. In fact, it’s rather dull,” he wrote.
