(ATF) Myanmar has a banking crisis that has hammered business and is proving extremely onerous for its citizens. Residents in Yangon have to queue from the early hours of the money just to get relatively small amounts of cash.
In the three and half months since the army ousted the government led by Aung San Suu Kyi, the kyat (‘chat’) has plunged, losing about 20% of its value. One US dollar could buy 1,345 kyat in January, but this week the exchange rate was close to 1,700.
The banks in the big cities have been closed or open only intermittently as many staff have gone on strike to protest against the coup. With the internet shut off for long periods, online transactions are difficult and international transfers often unsuccessful.
That has created major problems for Burmese people and small businesses as they try to navigate an economy crumbling under the new military leaders and the collapse of tourism, one of sectors that saw rapid growth in recent years.
“It’s now very difficult to operate a business,” Hnin Hnin, an entrepreneur in her mid-20s who supplies shampoo and bedsheets to high-end hotels told Reuters. “Traders don’t accept bank transfers now. They want cash. So we need to find the cash.”
Withdrawals are limited to 200,000 to 300,000 kyat ($128-$192) a day and ATMs often run out of money quickly.
It is now almost impossible to get hold of US dollars and other overseas currency at regular exchange centres in Yangon, local citizens have said. Black-market traders will take online transfers in exchange for physical notes in various currencies, they said, but add a commission of up to 10%.
The coup and the protests against it now mean there is no functional banking system, according to Richard Horsey, an independent political analyst specialising in Myanmar.
“You have a three-pronged hit to the banking system,” he said this week. “The pre-existing problems with the banks, which will be all the more difficult to resolve now; you have the economic impact of the coup which has produced a virtual hard stop to the economy without any kind of ability by the regime to manage that or inject stimulus; and then you have the banking sector strike itself.”
People want to withdraw cash now to buy food and other essentials, said Horsey, and also because they fear the banking system will collapse.
POVERTY RATE COULD DOUBLE
For the past decade, Myanmar was one of the bright lights for investors in Southeast Asia with economic growth of at least 6% a year. But that ended on February 1 with the shock military takeover – a move vehemently opposed by citizens all over the country.
The civil disobedience movement launched in opposition to the takeover was met with brutal force; close to 800 people have been killed and thousands jailed. Almost daily there are reports of clashes, as fighters with ethnic armed groups and ordinary citizens confront troops and police in towns and cities all over the country, while people who speak out against the coup are being arrested and often tortured.
Fitch Solutions said last month it expected Myanmar’s gross domestic product to shrink by 20% this year.
And the United Nations Development Programme said Myanmar faces economic collapse due to the combined effect of the coronavirus and the coup, which could put nearly half the country’s 54 million people into poverty if a political solution to ease the crisis is not found promptly.
“If the situation on the ground persists, the poverty rate could double by the beginning of 2022,” the UNDP said in its report.
The World Food Programme has said up to 3.4 million people could will go hungry this year because of the employment crisis and sharp rise in food insecurity.
At least 600,000 people are estimated to have lost their jobs in Yangon, half in the construction industry when major infrastructure projects ground to a halt, and a similar number in the garment sector. About 75% of the clothing factories have shut after foreign buyers such as Benetton and Sweden’s H&M suspended operations a few weeks after the coup.
Many of the young garment workers have been forced to return to their villages or home towns to find an alternate way to survive with their families.
Meanwhile, sea trade has been hit hard and work has ceased on many major projects launched by foreign investors – a dam in Shan State, a big industrial estate and a Toyota manufacturing plant near Yangon.
BUSINESS COUNCIL WANTS A SPECIAL ENVOY
The situation is so grim that the US-ASEAN Business Council has called for Washington to appoint a special envoy to try to resolve the crisis.
The US has imposed sanctions on Myanmar’s military leaders, plus trade sanctions on two major military conglomerates – Myanma Economic Holdings and Myanmar Economic Corporation Ltd. The US Treasury also imposed sanctions last month Myanma Timber Enterprise and Myanmar Pearl Enterprise in a bid to cut financial lifelines for the junta.
But the Business Council wants President Joe Biden to try a different tack, by selecting an envoy with support in the region – and quickly appointing US ambassadors in Singapore and Thailand and for Asean, the regional body which includes Myanmar.
Chairman of the business council Alexander Feldman said: “The unfolding situation in Myanmar threatens economic collapse and imperils the lives of the people of Myanmar.
“The US government must fully equip and deploy its diplomatic arsenal in ASEAN to confront this crisis, which includes filling key ambassador posts in Southeast Asia and appointing a dedicated special envoy for Myanmar,” he said.
“American leadership is necessary in this critical moment to realise a viable path forward for Myanmar and ensure stability in the region,” Feldman said.
Two years ago, the council organised a visit by representatives of major US companies to Myanmar to boost investment. They included Amazon, Google, Coca-Cola, Chevron, Chubb, Diageo, Ford, MasterCard and Visa.
In Yangon,an egg and cooking oil trader who identified herself as Khin told Reuters the flow of eggs, oil and other agricultural commodities had slowed substantially and was no longer sufficient, forcing her to raise prices by 25%.
Groceries are still available in markets and shops, but some analysts worry that farmers will not have access to seeds or credit to buy them before the monsoon planting season around June.
“Farming in rural areas has already slowed down and the impact will be huge in the next season,” said Khin. “Beans suppliers and chicken farm owners aren’t sure if they can start another cycle.”
A major rice trader who works with hundreds of Myanmar farmers said he lacks the cash to buy rice from farmers, which means in turn the farmers do not have money to buy equipment or pay workers to produce the rice.
In some parts of the country, such as Karen State in the southeast, the situation is already dire.
Steve Gumaer, a long-time aid worker with Partners NGO, said: “Through incredible hardship, the people whose villages were attacked by the Myanmar Armed Forces continue to hide in remote places in the forest.
“More than 30,000 people are recently displaced in Myanmar, roughly half of them children who are hiding in the forest with no sustainable means of survival. We continue to appeal to Thailand and the international community to negotiate immediate humanitarian access to assist them,” he said.
With reporting by Reuters.