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Burmese Kyat Plunges 330
- Subject: Burmese Kyat Plunges 330
- From: RANGOONP@xxxxxxx
- Date: Fri, 12 Dec 1997 16:06:00
RANGOON, Dec 12 (Reuters) - Burma's kyat plunged to a record low against the
U.S. dollar and the dollar-denominated foreign exchange certificates (FECs) on
the parallel market on Friday, dealers and analysts said.
The kyat shot through the 300-level for the first time this week and was
trading around 307 to the FEC and 330 to the dollar early on Friday. This
compares to 278 per FEC and 294 per dollar two weeks ago.
``The kyat has never plunged against the dollar or the FEC as low as it is
now,'' one dealer said.
It has fallen nearly 50 percent since July.
In the official exchange market, which is rarely used in Burma, the kyat was
unmoved at 6.3 per dollar.
The FEC was introduced in February 1993 mainly so foreign tourists would not
have to buy kyat at its overvalued official rate. Initially it could only be
exchanged for dollars but in December 1995 the government allowed it to be
also swapped for kyat.
Analysts said the country's growing trade and budget deficits were two major
underlying causes for the currency's weakness.
``The growing trade deficit adds to the demand for hard currency,'' one
An over-supply of kyat in the system, caused by rising government spending,
adds to the problem, he said.
Many private, semi-private and even government enterprises have begun selling
goods and services in FECs or dollars -- adding to the demand for hard
currency and leading to a drop in confidence for the kyat.
``Charging in FEC or dollars means they have no confidence in the kyat,''
another analyst said.
The impact of the regional currency crisis has also been felt although it was
not a major factor, analysts said.
Many private banks have raised interests rates on savings deposits by 25 to
150 basis points, effective on December 1. Interest rates on savings at
private banks now range from 12.5-15 percent compared to 12 percent at the
state-owned Myanma Economic Bank.
But many people say they can't afford to save.
``Most people can't think of savings whatever the interest rate may be. They
scarcely earn enough to make ends meet,'' said one bank clerk.
Retailers were complaining about the drop in the kyat, saying that they were
unable to order more goods due to rising prices and the dropping value of the
``Today's profit won't cover tomorrow's loss,'' said one retailer. ``Under the
present situation, the more we sell now the more we lose tomorrow.''
A recent announcement published by the Myanma News Agency that Singapore was
going to require Burmese passport holders to produce a bank statement showing
they had S$3,000 as show-money when they apply for a visa to the island state.
The new rule, which goes into effect on December 27, was expected to cause a
further drop in the kyat's value.
``We are sure that requirement will make demand of hard currency rise higher
than ever,'' one dealer said.
Most analysts and dealers said they didn't see an end in