BANGKOK -- An order by Myanmar’s central bank that all foreign currency in bank accounts must be converted into the local currency has many in the military-ruled country worried over potential losses.
Businesses and individuals were told in a notice issued Sunday that as of Monday they must convert dollars and other foreign currency into kyats within one day or face legal consequences.
Foreign currency can only be sent overseas with government approval, it said. It said further details of the rules would follow.
Myanmar’s military leaders are facing a raft of sanctions after they seized power on Feb. 1, 2021, ousting the country’s elected government. The order to hand over foreign exchange suggests the authorities may be running short of hard currency needed to pay debts and purchase key supplies such as oil, gas and weapons.
Hard currency is also needed to repay foreign debt, which for Myanmar stands at about $10-$11 billion.
The central bank order instructed holders of foreign currency accounts in Myanmar to open new accounts to convert funds into kyats (pronounced CHUHTs). People earning foreign currency are supposed to also convert their money into kyats, which are not a convertible currency and are not supposed to be taken out of the country.
An official from Kanbawza Bank said Tuesday that some traders and sailors had come in to inquire about opening the required new business accounts but most said they would “think about it.”
The bank staffer, who spoke on condition they not be named because they were not authorized to speak to media, said account holders were worried they would lose money since the exchange rate set by the central bank, 1,850 kyats per dollar, is below the prevailing black market rate of 2,030 kyats per dollar.
One unauthorized money changer consulted Tuesday said they were not doing any exchanges.
Of seven people with foreign currency accounts asked about the order, most said they had not opened new accounts and were unsure about the consequences.
A businessman at a trading company said major businesses already have such accounts and banks have been converting their export earnings into kyats.
One businessperson said in a Facebook post that the bank had sent him a box of cakes as a gift after converting his foreign exchange holdings into kyats, joking that it was worth “millions of millions" and that the name of the cakes was “exporters' tears."
After the military took power last year, Western governments imposed targeted sanctions on the military, military affiliated companies, officials and their families. Their foreign assets were frozen, at a time when the country had lost a large share of earnings from tourism due to the pandemic.
Myanmar's foreign reserves stood at nearly $7.8 billion as of December 2020, according to the World Bank.
The military leadership has also sought to relieve pressure on its foreign exchange reserves by encouraging the use of Thai baht, Indian rupees and Chinese renminbi, or yuan, for trade in border areas. Last year, authorities moved to stem a plunge in the kyat’s value against the dollar.
The administration recently said it plans to reopen the borders to foreign tourism in mid-April. That might alleviate pressures on the country's finances somewhat, though its unclear how much tourism can be expected at a time when experts say widespread resistance to the coup has left the country on the brink of civil war.