On 13 July, the Central Bank of Myanmar (CBM) issued notification 15/2023 taking steps to increase the availability of foreign exchange available on the market and reduce the effects of foreign exchange losses for exporters.
Since August 2022, exporters have been mandated to convert 65% of their foreign exchange earnings from exports to Myanmar Kyat at close to the CBM reference rate, currently MMK2,100 per USD. Exporters were permitted to sell the remaining 35% into the local market to buyers permitted to remit foreign exchange offshore (primarily importers) at a rate agreed upon by both parties, which led to the establishment of an unofficial market rate of foreign currency. With the reference rate at times being a little more than two thirds of the value of the market rate this essentially acted like a significant tax on exporting with exporters incurring exchange rate losses on the 65% which they were mandated to exchange at reference rates.
The latest notification on 13 July changes the amount which is required to be exchanged, reducing it from 65% to 50%. This will be welcome news for exporters who will be able to exchange a greater percentage of their foreign exchange at market rates. With the spread between the reference rate and market rate increasing in recent weeks this increase the amount of foreign currency that exporters may retain which may offset some of these additional losses they are facing.
The other benefit may be that it brings additional liquidity into the foreign exchange market which will ease constraints faced by importers in trying to source foreign currency.
It should be noted that this comes shortly after additional regulations imposed by the CBM giving it authority to control the market rate. See more about that here. With the CBM prioritising stabilising the exchange rate and preventing further devaluation of the Myanmar Kyat, it appears that they are trying to address this through both giving themselves further control over demand as well as taking steps with this current notification to increase the supply of foreign currency.