Myanmar’s political stalemate leaves the economy in tatters

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The military takeover in Myanmar has set its economy back for years, if not decades, as political turmoil and violence disrupt banking, commerce and livelihoods and millions of people slide further into poverty.

The Southeast Asian country was already in a recession when the pandemic took hold in 2020, crippling its lucrative tourism sector. The political upheaval after the military ousted its civilian government on February 1 has accumulated further misery on its 62 million people, who are paying significantly higher prices for food and other necessities while the value of the kyat, the national currency, precipitates.

With no end to the political impasse in sight, the prospects for the economy are murky.

UN humanitarian chief Martin Griffiths last week appealed to Myanmar’s military leaders to allow unhindered access to more than 3 million people in need of “life-saving” aid “due to growing conflict and insecurity. COVID-19 and an economy in crisis “.

Griffiths said he was increasingly concerned about news of rising levels of food insecurity in and around cities.

Hundreds of thousands of people in the country have lost their jobs and poverty has increased as Myanmar’s inflation has skyrocketed.

“Imported foods and medicines cost twice as much as before … so people only buy what they need. And when traders sell an item for 1,000 kyat one day and 1,200 kyat the next, it means the seller is losing while selling. , “said Ma San San, a trader in the town of Mawlamyine who sells Thai products.

According to the Asian Development Bank, Myanmar’s economy is expected to shrink by 18.4% in 2021, one of the deepest recent contractions ever.

The civilian government expelled in February was making slow but steady progress towards integrating impoverished Myanmar into the global economy after decades of near isolation under past military regimes. Exports have increased over the past decade after generals loosened their decade-long power. Eager to exploit a young, low-cost workforce, foreign investors set up factories to produce clothing and other light manufactured goods.

Yangon, the former capital and largest city, has been transformed as moldy buildings dating back to the British colonial period have been renovated or demolished, giving way to new streets, industrial areas, shopping malls and modern apartments. Private companies have sprung up, creating jobs and satisfying long-lacking demand for products like cell phones and new cars.

But the military still controlled key government ministries and many industries, and corruption and cronyism thrived. Months after Myanmar’s political crisis, the country is back in the days of the black market and dollar hoarding.

“Now most people are losing faith in Myanmar’s currency and buying dollars, so prices are going up,” said Soe Tun, president of the Myanmar Automobile Manufacturers and Distributors Association and an official of the Myanmar Rice Association.

Trade has been hampered by both the global shortage, and rising costs, of shipping containers, and the closure of borders by China to exports from Myanmar to help control coronavirus outbreaks.

Myanmar’s total trade fell 22 percent from a year earlier in the 10 months from October 2020 to July 2021, Senior General Min Aung Hlaing, who led the military takeover, recently told his military cabinet. He said the country had a trade deficit of $ 368 million.

The less Myanmar exports, the less it earns in foreign currency – mainly dollars – making the greenback even more scarce and more valuable than the kyat.

In January, the dollar bought 1,300-1,400 kyat. At the end of September, it hit a record 3,000 kyat among the money changers on Shwebontha Street in downtown Yangon, informally known as Broker Street.

This has caused kyat prices to rise for basic necessities such as cooking oil, cosmetics, food, electronics, fuel, and other increasingly expensive supplies that must be imported using dollars.

Authorities have suspended vehicle imports since October. 1 to store foreign currency. To stem the collapse of the kyat, the Central Bank of Myanmar has intervened in the market 36 times since February. But those deals have had little impact, traders say, as most of the dollars the central bank sells goes to pro-military firms.

“Some say that dollars issued by the central bank are not satisfying domestic demand, and we accept that that is true,” Major General Zaw Min Tun, a spokesman for the military administration, told reporters.

“As a government, we need to take responsibility for what has happened in our time rather than blaming the past,” he said. “I mean our government is working hard to find the best solution.”

Some people have set up money exchange groups to exchange kyat for dollars online despite the risks, and the central bank recently issued a warning banning such unofficial reports.

“Online is easier these days. You can easily find people who want to buy or sell. But you have to build trust between sellers and buyers. There are also scammers online,” said Ko Thurein, who often posts dollar sales in the Myanmar Money Group. exchange rate.

Fuel shortages have become a major problem. Thanks in part to rising global oil prices, the cost of gasoline, which is imported as Myanmar has a poor refining capacity, has more than doubled to a record 1,500 kyat per liter from around 700 kyat in January.

Zaw Min Tun, the army spokesman, said Myanmar was working on long-term hydroelectric and wind power projects as it sought to save energy and cut imports as it could not “cover fuel demand.”

Leader Min Aung Hlaing urged the public to help reduce energy consumption.

“It’s hard to buy dollars and oil companies no longer sell us on credit,” said an official at Max Energy, a major conglomerate that operates dozens of gas stations. “You can’t buy everything you want and we have a hard time building trust with them. So we’re just trying not to lose too much at the moment.”

He blamed the political crisis. “Even in our country, people do not trust each other and there is no doubt that foreigners do not trust us. Also because the banking system is in turmoil,” said the official, who spoke to condition of anonymity given the sensitivity of the subject.

“Gasoline prices have skyrocketed, so we have to raise the fares. But the passengers don’t want to pay. I know everyone is impoverished right now, so people use buses instead of taxis,” said Moe Myint Tun, a Yangon taxi driver. “When we have high fuel prices, we lose a lot of passengers.”

Like many other modern services, banking services have been periodically disrupted by protests and strikes, forcing people who want to access their cash to use mobile banking apps and pay 5% -7% commissions in so-called Pay Money stores that provide services. financial.

“Due to inflation, the money in our hands automatically decreases in value. Once the money in the bank cannot be withdrawn, we have to pay a commission in the Pay Money stores. In the end, we have nothing left,” said Su Yee Win Aung, a sales employee at a telecommunications company in Yangon.

“It can be said that it is the most difficult time for us,” he said.

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