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Kyat plunge has currency dealers wo



Kyat plunge has currency dealers worried

The Nation, December 9, 1997

Rangoon - Burma's currency, the kyat, fell to a record low against the US
dollar yesterday, prompting fears among some currency dealers that the
military government punish them.

Yesterday, the kyat was trading at 314 to the dollar in the "grey" market.
It fell to 300 against the dollar for the first time ever late last week.

The government maintains an official exchange rate of about six kyats to a
dollar, but that is used mainly for state enterprises.

Otherwise, money is changed through grey market dealers, who follow market
forces, and government exchange counters, which at times attempt to control
or influence the rate.

Government exchange counters were recently offering only 199 kyats to the
dollar, but had to abandon that rate for lack of business.

Dealers said they weren't sure why the kyat was falling again, but that
customers, and particularly business, were buying more dollars than they
were selling, driving the price up.

"People come to my shop mostly to buy the dollar rather than to sell," said
one dealer, who spoke on condition of anonymity.

In September, the kyat was trading at 254 to the dollar, down from 140 a
year earlier.

In July, when the kyat hit 240 to the dollar for the first time, the
government detained several dealers for questioning. All were eventually
released without charges being field.

Last week, as the kyat hit 300, several dealers in Rangoon shut up shop,
fearing they might be questioned.

Unlike most other Southeast Asian currencies, the kyat is barely traded
internationally, and so is not subject to attack by speculators.

Some Burmese businessmen, however have said that the drop in value of the
Thai baht has hit the kyat because there is so much cross-border trade
between the two countries.

Analysts in Bangkok have frequently cited the military government's high
defence and weapons expenditures, and the mismanagement of the economy, as
the main reasons behind the kyat's decline.

The World Bank has said that the government spends nearly half of the
national budget on defence. Burma has no external enemies and its internal
insurgencies are dying out.

Analysts in Bangkok have also said there are several indicators that the
military government is extremely low on foreign reserves. Economic
statistics of the Burmese government are not considered reliable.

The analysts point to a law passed in August that prevents business from
repatriating profits of more than US$ 50,000 a month.

And some business operating in Burma told reporters in Bangkok that the
government was pressuring them to extend it loans in dollars.

The United States imposed economic sanctions on Burma in April because of
the military regime's repression against the democracy movement led by
Nobel laureate Aung San Suu Kyi and its alleged failure to fight the drug
trade.