Burma: Financial crisis and foreign assistance
By Win Htein, May 20, 2001
Mizzima News Group (www.mizzima.com)
Last week, Burma's beleaguered kyat currency fell to 900-kyat per dollar as a new record low in the recent history while the official rate remains 6-kyat to the dollar.
The kyat has been gradually sliding in exchange with the foreign currency since the military came into power thirteen years ago. Last month, the exchange rate was 500-kyat per dollar. In the beginning of this year, it was 350-kyat. At the time when the military seized power in 1988, the exchange rate was 70-kyat to the US dollar.
So, one wonders why the Burmese currency has plunged so badly! A spokesman of the military junta recently blamed some money dealers in the country for the kyat slide. "These unscrupulous people are circulating groundless rumors to fan panic so that they can cash in on the situation", he said. Some dozens currency-dealers were jailed after his comment.
A source in Rangoon said that people have lost confidence on kyat currency. "It is because of the rumors that the government will announce deflation soon", said a journalist who works for a business magazine in Rangoon. There are also reports that the military-own company (U Pi limited) had lost 2-million dollars in competition with private companies and thus the junta decided to buy dollars in open market in any rate.
"They needed dollars immediately as a credit before the Asia Development Bank (ADB)
and Least Developed Countries (LDC) annual meetings. So that they can get resumption of loans
from the ADB and the World Bank or the IMF".
Last month, the ADB, in its annual report of Outlook for 2001, had warned that the Burmese junta needs to implement immediate economic reforms and suggested to change the official exchange rate of 6-kyat per dollar. It said that at the end of March 2000, "the country's gross foreign exchange reserves were only about $ 240-million- less than two months of exports".
According to a Washington-based think tank, Cato Institute, Myanmar is number 122 of 123 countries which have freedom of economy in 2001. The United Nations Human Development report has ranked Myanmar as 125 out of the 174 countries in the world that are the least developed.
However, the regime has its own statistics. The State Peace and Development Council (SPDC) claimed that GDP of the country is growing 12 percent every year."The government constructed the dams, bridges, roads and all basis infrastructures in the whole country. So the Myanmar is now progressing like never before," said Gen Than Shwe, head of the regime, in his recent visit to central Burma.
"This inflation will bite the civil servants whose salaries were just promoted 5-times recently. Last month, a teacher's salary is 10,000 kyat or 20-$ while one dollar is equal to 500-kyat. But now his salary is only 10-$ with the current exchange rate" said a government servant in Rangoon.
Many Burma observers believe that the root of this currency crisis is based
on the international sanctions and on-going Thai-Burma border clashes.
After the fighting broke out between the Thai and the Burmese troops in the northern border in February, the SPDC ordered to ban all Thai goods and to close border-bridges. Since then, the border-trade is broken and the Burmese face shortage of Thai food. The price is now higher and the inflation is wider. The exchange rate in border is now 16-kyat per 1 Thai Bhat currency from 8 Bhat in early this year.
Although the junta is trying to substitute the shortage of Thai goods with the Chinese goods, it is not successful. The border-trade with China is also not working now because of fallen kyat. Now, the kyat is declined to 90-kyat per 1 Chinese Yen from 60-kyat in January.
"The junta copied many things form China, but not an economic policy," said a trader in Sweli (China-Burma border) who had served several years for the Communist Party of Burma. "China is opening for a real free market. But in Burma, the generals do just lip service and nepotistic policy".
According to a 'White Paper' of junta's foreign ministry, the border-trade is the main business to go against the US-led international trade sanctions on the regime. The 5-pages paper dated 2nd December last year said, "The ILO and UN's economic and social affairs committee will sanction us soon due to the exiled groups which are lobbying on human right records and force labor in the country".
However, the ILO and UN are now on holding their procedures on Burma. This is because the junta started having 'Secret Talks' with opposition leader Aung San Suu Kyi in last October. But the EU Council and US government decided to continue their trade sanctions on Burma, as they don't see any real progress. Meanwhile, the Japanese government has decided to give 28-million dollar to junta as a reward for talking with opposition leader while the ASEAN countries protested against the ILO's decision to punish the junta for the use of forced labor.
In this situation, is there any way for the junta to come out of the financial crisis?
Last week, the junta's finance minister U Khin Maung Thein appealed to ADB, in annual meeting at Hawaii, to lift the 1986 aid embargo saying that his country is on the road to reforms.However, he did not get positive response from ADB. "We are still monitoring the political situation in Burma", ADB President replied. He did not say when and how the ADB plans to resume aid to Burma. Currently, the junta's economic planning minister U Soe Tha is trying in a similar way at the Least Developed Countries (LDC) annual meeting in Brussels to erase the country's 6-billion dollar debt.
"This is impossible. Because they must do something before they come here. This includes reforming economic policies and progress on the country's human right situation," commented Dr Zaw Oo, a Washington-based economic researcher who is attending the LDC meeting.
"Without changing the policy, there is no way to solve the current financial crisis. Without changing the system of government, there is no hope for external aid", he added.
Win Htein is a correspondent for Democratic Voice of Burma.