The Central Bank of Myanmar (CBM) is planning to take additional measures to further stabilise the foreign exchange market, vice governor U Soe Min said in Parliament on Monday.
The new measures may include it intervening in the foreign exchange market, the Myanmar Times understands. The move comes on the back of a recent bout of volatility in the local exchange rate.
After U Soe Thein, who is also vice governor of the CBM, raised concerns over runaway non-performing loans (NPLs) in Parliament in late August, the Myanmar kyat plunged more than 1 percent to K1487 per US dollar.
The local exchange rate quickly rebounded after the CBM allayed fears that strict action would be taken against debtors. On Thursday, the exchange rate was K1532 per dollar, up 2.5pc from its August trough.
“This kind of volatility in the kyat is not good for trade and foreign direct investments, which require a stable exchange rate,” said U Soe Min. He added that the CBM is working on a framework allowing it to intervene during periods of short term volatility.
The CBM currently sets a daily weighted average reference rate after considering inter-bank transactions. It adopted the current exchange rate policy in February, moving from a floating exchange rate regime implemented in April 2012.
U Soe Min said Myanmar needs a stable exchange rate to balance between managing inflationary pressures on imports as well as ensuring Myanmar goods are competitively priced for the export market.
For example, the prices of imported goods such as computers, mobile phones and construction materials become dearer when the kyat depreciates.
“A stable exchange rate is also essential for foreign exchange received from exports to fully enter the country via official banking channels. We are coordinating with the relevant ministries to set policies for this,” he said.
U Aung Ko Ko, a member of Economic Committee of the National League for Democracy, said a stable exchange rate facilitates smooth decision making among businesses. “Businesses and traders take risks whenever the exchange rate is volatile. Over the past four months the exchange rate has been stable and if this continues, the economy will improve,” he said. – Translated
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