Burmese junta powerless as currency drops 60% in four weeks

To say that various countries around the world are facing economic fallout would be an understatement. In a recent turn of events, Myanmar finds itself at the crossroads between two battles: the covid crisis and the economic crisis in its country. Due to its economic crisis, the Burmese currency suffered, to such an extent that its value lost more than 60%. What is more astonishing is the fact that such a drop in value has been observed since the beginning of September. To access the severity of the collapse, it should be noted that the prices of fuel and food in the economy have increased dramatically.

The reason for Myanmar’s powerlessness

It should be noted that the economic fallout seen in Myanmar is not due to faulty or ominous fiscal or monetary policy, but to various political reasons. Eight months ago Myanmar witnessed a military coup that sparked nationwide protests that were reportedly suppressed.

Richard Horsey, an expert on Myanmar at the International Crisis Group believes that the current rate of economic fallout will indeed shake the generals. This will be due to the fact that generals are quite obsessed with the kyat rate as a larger barometer of the economy. How that will reflect on the government they are trying to put in place or on them will make such economic spinoffs pretty crucial for the generals.

Such a claim can be corroborated by the fact that in August the Central Bank of Myanmar, under the leadership of generals, attempted to peg the kyat at 0.8% or against the dollar. But such a policy had to be abandoned due to the increasing pressure on the exchange rate.

Because of the economic fallout, the economy faces knockbacks. It should be noted that the country is indeed facing a currency shortage. This means that the dollar shortage has presented a problem for many in the economy. The economic situation has been severely battered as many money and currency exchangers have effectively shut down their stores. The main reason for this can also be attributed to the fact that the price of the currency is currently quite volatile.

Myanmar currency drops to all-time low amid post-coup unrest - diplomat

To analyze the statistics over time, it was discovered that the exchange rate is currently at the rate of 2,700 kyat per dollar, compared to 1,695 kyat per dollar which was traded on September 1. The data needs to be looked at in more detail, in the month of February the kyat per dollar was trading at 1,395. This was around the time the military overthrew the democratically elected government which was strategically led by the leader. Burmese and Nobel Laureate Aung San Suu Kyi.

With the current sluggishness of the economy, are there any chances for its recovery? According to the World Bank, the economy is expected to collapse sharply by 18% for the current fiscal year.

The main reason that has been put forward for such a grim prediction is the ongoing pandemic which has taken its toll on the economy. With the fall in the exchange rate severely affecting the economy, indicating that the currency is losing value at an exorbitant rate, it is clear that Myanmar is also experiencing the largest employment contraction in the region. With the economic uncertainty, the pandemic, unemployment and the declining exchange rate in the economy, it would be quite appropriate to state that the income gap in the economy will only get worse.

But how exactly is the military coup in the country affecting its economy? First, incompetent leadership with political instability is to blame for the economic state. Second, without a competent government, one certainly cannot expect sagacious economic policies. On the other hand, growing economic pressures are also being felt amid serious signs of an upsurge in bloodshed in the country for the restoration of democracy. Thus, it can rightly be said that the worse the political situation in the country, the worse the economic condition will be.

In addition to incompetent leadership and the political crisis in the country, Myanmar is also grappling with the pandemic. The second wave of a virulent disease, in particular, worsened the country’s economic and health situation. The country’s health problems have been exacerbated, especially as scores of health workers joined in protests against the authorities.

Myanmar junta powerless as currency drops 60% in four weeks

It should be noted that a great panic among the citizens had also led to such fallout. According to reports, in the months immediately following the February 1 coup, the public had adamantly pulled their savings from banks into the economy. In fact, gold was also bought in large quantities.

Given that no concrete evidence and information is available, many analysts believe that the central bank’s withdrawal from its managed float strategy could be due to the depletion of foreign exchange reserves.

It should be noted that the economic crisis has led to a surge in the prices of basic foodstuffs. In fact, the country’s economic woes have been exacerbated to such an extent that the United Nations Office for the Coordination of Humanitarian Affairs has categorically declared that at least three million people are in urgent need of humanitarian assistance. in Myanmar. To put these statistics in perspective, this is an increase from the million recorded before the coup.

Edited by Sanjana Simlai.

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