Exclusive: Myanmar to float currency in 2012/13, unify FX rates

Tue Mar 6, 2012 5:53am EST
 
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By a Reuters staff reporter

YANGON (Reuters) - Myanmar will begin a managed float of its currency in the fiscal year from April and develop an interbank money market, according to central bank documents obtained by Reuters, ending a fixed-rate currency system that has stifled investment and fueled a black market.

The plan for Myanmar's boldest economic reform yet was laid out by central bank deputy governor Maung Maung Win in documents seen by Reuters Tuesday that said preparations to unify the dual exchange rate should be made by the end of this month.

That would be followed over the next 12 months by a managed currency float of the kyat and the introduction of an interbank currency market, which would allow authorities to intervene and influence the rate.

From 2013/14 onwards, Myanmar would aim to "entirely eliminate" the "informal" currency market, the documents said.

Last March the former military junta made way for a nominally civilian government that embarked on a major reform drive, freeing hundreds of political prisoners, loosening media controls and engaging with Nobel Peace Prize laureate Aung San Suu Kyi, leader of Myanmar's pro-democracy movement.

Officially, one U.S. dollar buys a little over six Myanmar kyat. Unofficially, it's more like 800 kyat.

The kyat's unofficial rate, used in most transactions, has jumped from more than 1,000 per dollar in 2009 as foreign money has flowed into the timber, energy and gem sectors. That has hurt a swathe of Burmese, from farmers and manufacturers to traders and employees of foreign firms paid in dollars.

The central bank documents did not indicate what the free market rate might be.   Continued...