Resource-rich Myanmar may be about to undo one of the financial holdovers of 50 years of military rule: it could be preparing to decouple the kyat from the International Monetary Fund’s special drawing rights–a 35-year-long restriction that kept the official exchange rate at about 6.4 kyat to the dollar. If it perseveres, it would be offering yet another victory to reformers, according to one economic researcher.
In a Bloomberg report, the possibility of currency reform in Myanmar was viewed by the IMF as removing obstacles to the country’s potential to become “the next economic frontier in Asia.” Currently the official exchange rate is about 125 times stronger than the informal market rate of 800 kyat to the dollar.
Not only that, but there are seven different exchange rates currently in force in the country. The currency float would do away with all of those, which would bring the country closer to shedding the remnants of a half century of military dictatorships and would be the largest economic change instituted thus far by President Thein Sein, who took office last year. It would also open the door to the country’s entrée into global commerce.
Sean Turnell, a professor at Macquarie University in Sydney, Australia, who conducts research on Myanmar’s economy, was quoted saying of the move, “It would be a considerable victory for the reformers.” He added, “The people who would lose out the most would be the inner core of the highest echelons of the military, which used the old rate to accumulate reserves that were used to do what the military wanted to do.”
Economic sanctions during the military regime have also led to a dearth of technical expertise in banking, something a number of regional lenders are hoping to reverse. Numerous European and U.S. companies are also looking to invest in Myanmar once barriers to trade come down.