CNI News
9 August 2022
Strong exports and manufacturing are important to check the depreciation of MMK and appreciation of foreign currencies, economists told the CNI.
However, it is necessary to maintain stability to increase production in the country, an economist, who requested anonymity for security reasons, told the CNI.
He said, “ The economy of a country can be affected by various factors. Domestic production has been falling. Farmers can’t even work on their land. The main problem of the country is the instabilities. Only when a country is stable, will it be able to make economic progress. When production falls, so does the export. When a country falls in export, it will have to struggle. When a country is unstable, it is very difficult for it to do business. There is no prospect for growth. The country has to export more products for its foreign exchange incomes and to check the inflation. It is impossible to check inflation without production and output. Now, the government will show its deficits in its budgets. As the people refused to pay taxes, it cannot control the economy while earnings from export are very low. The only thing the government does is to print money from the CBM, pushing up the inflation rates. So, the MMK will depreciate further.”
The depreciation of MMK is the major consequence of the decline in production, lack of effective policies and adoption of wrong policies, Agriculture and Economic Consultant Ko Zaw Min Ning told the CNI.
He pointed out that correct policies must be adopted to remedy the issues of production, exports and imports.
Myanmar Kyat and US dollar notes.
“The fluctuation of dollar prices mainly affects the public and those who engage in production like farmers because Myanmar is a country that relies on imports. As the US$ exchange rate climbed to MMK 2,100, the prices of imported goods and foodstuffs will rise. Similarly, production costs of farmers will go up because they have to depend on imported fertilizers and seeds. So, the public and farmers will be hit first. So, there will be public unrest and the country will be unstable, according to theories,” he said.
As the public was affected by the appreciation of US$ in the international market and the depreciation of MMK at home, it was necessary to take effective action against speculators, he added.
Under the current political situation, it would take a long time for MMK and the economy to recover, another economist said.
“A currency can appreciate when the economy is in good shape and the public has trust in the currency. Currently, both the economy and the public trust are deteriorating. It is important to restore both of them. Priority must be given to the economy and the political situation must be stable. Only when the country is stable will the businesses be able to run their operations smoothly. Then, efforts must be exerted to build trust in MMK,” he said.
As the Central Bank of Myanmar raised the official exchange rate of US$ from MMK 1,850 per US$ to MMK 2,100 as of 5th August, market exchange rates are likely to rise further, according to economists and traders.
