Thursday, November 3, 2011

IMF to work with Burma in revising currency exchange policy

Thursday, 03 November 2011 12:36 Aye Lea

Chiang Mai (Mizzima) – A team from the International Monetary Fund (IMF) is prepared to cooperate with Burmese authorities as they revamp the country’s currency exchange policy.

The announcement came at the end of a two-week assessment visit by a team led by Ake Lonnberg, a senior financial sector expert in the IMF Monetary and Capital Markets Department.

The team consulted with government officials, banks and representatives from public and private companies in Naypyitaw and Rangoon from October 19 to November 1.

A Burmese bank employee counts kyat bank notes in Rangoon.  A high demand for Burma's natural resources is driving up the value of the  country's currency, posing a headache for the new government which has called in the IMF to help redesign its currency exchange policy. Photo:  AFP
The goal of the redesign is to stabilize and unify the currency exchange rate system with international monetary standards and practices.
The state-run newspaper New Light of Myanmar reported on Tuesday that the team discussed an initial diagnostic assessment of the legal framework and actual market practices governing the exchange rate system of Burma and, especially, the existing exchange restrictions and multiple currency practices.

A statement issued by the team said: “IMF members accepting the obligations of Article 8 undertake to refrain from imposing exchange restrictions on the making of payments and transfers for current international transactions or from engaging in discriminatory currency arrangements or multiple currency practices without IMF approval.

“The team will continue its work from the IMF headquarters in cooperation with Burmese authorities as they formulate their policies towards accepting the obligations of Article 8. The team expects to visit Burma again for a follow-up mission in early 2012,” the statement said.

The Washington-based IMF comprises 187 countries. IMF may provide monetary help and advice to its members and helps in stabilizing their monetary and financial policies, creating more job opportunities and promoting economic development and poverty alleviation.

On Sunday, Burma’s opposition leader Aung San Suu Kyi and Union Minister Aung Kyi met for the fourth time and discussed the importance of free trade and commerce and a free monetary circulation system for the economic development of the nation.

The IMF has postponed offering monetary support to Burma, which became an IMF member in 1952.
In September, Mizzima reported that Burmese economist Khin Maung Nyo said the government needed to establish clear laws and regulations regarding currency exchange or many people would continue to use the black market for exchanging foreign currencies.
“Nobody wants to buy and sell foreign currencies in the black market. But the black market will be dissolved only if suitable currency exchange laws are imposed,” Khin Maung Nyo said.
On August 30, Upper House MP Thein Win submitted a proposal in Parliament that urged the government to amend, draw and prescribe administration laws in the Ministry of Finance and Revenue.
Minister for Finance and Revenue Hla Tun said that laws have been amended and modified and a relevant bill has been submitted to Parliament.
Hla Tun told Parliament that the ministry had coordinated with the Attorney General’s Office to amend The Pension Act, The Foreign Exchange Regulation Act, the Central Bank of Myanmar Act and the Myanmar Financial Institution Act.
A weak foreign currency exchange is cited as a major reason foreign companies are slow to enter the Burmese economy.
A Wall Street Journal article in August attributed the government's inability to change its currency rate system as partly due to a lack of foreign reserves and a lack of support from the International Monetary Fund, which in turn is a result of pressure from the U.S.
The Network Myanmar group has estimated that official reserves are currently estimated at around US$ 5.5 billion. External debt is about US$ 8.6 billion, including arrears of US$ 3.9 billion.
The official exchange rate has been pegged at 8.5 kyat  since 1977, currently equivalent about 5.5 per US$, while the parallel market rate, which is now generally used for external transactions, stands at around 760 kyat per US$.

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