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Money lines, tokens and brokers: Myanmar’s crumbling economy runs out of cash

By on May 14, 2021 0

(Reuters) – If you need cash in Myanmar, you have to get up early. Queues start to form outside banks at 4 a.m., where the first 15 or 30 customers are given a plastic token that will allow them to enter the bank when it opens at 9:30 a.m. and withdraw. money, according to more than a dozen people speaking out. to Reuters.

People line up outside a bank to withdraw money, Yangon, Myanmar, May 13, 2021. REUTERS / Stringer

If you don’t get a token, you either have to queue for hours for the few ATMs that work outside, or go to black market brokers that charge big commissions.

The liquidity crisis is one of the most pressing issues for the people of Myanmar after the February 1 military coup. The central bank, now headed by a person appointed by the junta, has not returned some of the reserves it holds for private banks, without giving a reason, leaving the banks strapped for cash.

The banks themselves have only been closed or opened intermittently, as many staff went on strike to protest the coup. Meanwhile, internet outages make online transactions difficult, and international transfers have largely ceased to function.

This poses challenges for Burmese and small businesses as they attempt to navigate an economy that is rapidly collapsing under the country’s new rulers and the collapse of tourism, one of the fastest growing sectors in the country. Myanmar. The Burmese kyat has lost around 20% of its value since the coup.

“It’s very difficult to run a business now,” said Hnin Hnin, an entrepreneur in her twenties who supplies shampoo and linens to upscale hotels. “Merchants don’t accept wire transfers now. They want the money. So we have to find the money. “

As a result, Hnin Hnin, who agreed to be identified only by part of her name to discuss sensitive issues, was one of the thousands of people lining up daily in front of the few functioning ATMs. in the big cities. Some people get together in groups of five, she said, so that one person can withdraw money for the whole group.

She was also forced to find ways to pay her suppliers overseas, making a deal to exchange money with a partner who held cash in an account in Thailand. Under the deal, the partner gives Hnin Hnin access to her Thai baht account, so she can pay vendors in Thailand, and Hnin Hnin repays her with physical kyat notes in Myanmar.

The central bank and junta did not respond to requests for comment. Reuters asked questions of Myanmar’s four largest private banks, including Kanbawza Bank and CB Bank. They also refused to respond.

It is now almost impossible to get hold of US dollars or other foreign currency at regular exchange centers in Yangon, a dozen people told Reuters. Black market traders will take transfers online in exchange for physical notes in various currencies, they said, but will add a commission of up to 10%.

Myanmar’s private banks were in trouble long before this year’s coup, at least in part because of their habit of lending money to well-connected customers who rarely bothered to pay them back, have at least four bankers, including the then deputy central bank governor, told Reuters. in 2017.

The coup and the protests against it now mean there is no longer a functioning banking system, according to Richard Horsey, an independent political analyst specializing in Myanmar.

“You have a triple impact on the banking system,” said Horsey. “The pre-existing problems with the banks, which will be all the more difficult to resolve now; you have the economic impact of the coup d’état which practically brought the economy to a screeching halt without any sort of capacity of the regime to deal with this or to inject stimulus measures; and then you have the banking sector strike itself. “

People want to withdraw money now to buy food and other essentials, Horsey said, and also because they fear the banking system will collapse.


The liquidity crisis is the most immediate sign of much deeper economic problems Myanmar faces, some experts have said.

Financial research firm Fitch Solutions said in April that it expected Myanmar’s gross domestic product to decline by 20% in 2021.

The United Nations Development Program said last month that Myanmar faces an economic collapse due to the combined effect of the novel coronavirus and the coup, which, in its worst-case analysis, could put nearly half of the country’s 54 million people in poverty, compared to about a quarter. in 2017.

“If the situation on the ground persists, the poverty rate could double by the start of 2022,” UNDP said in its report. “By then, the shock of the crisis will have resulted in significant losses of wages and incomes, especially on the part of small businesses, and reduced access to food, basic services and social protection.”

Millions of people are expected to go hungry in the coming months, the United Nations World Food Program said in an analysis released in April.

Some workers have returned to resume their banking jobs in recent weeks, but financial analysts do not see an immediate easing of the liquidity shortage.

In Yangon, the country’s commercial capital, an egg and cooking oil trader who identified herself as Khin told Reuters that the flow of eggs, oil and other agricultural products had slowed considerably. and was no longer sufficient, forcing it to raise prices by 25%.

While groceries are available in markets and stores, some national analysts said they fear farmers will not have access to seeds or credit to purchase them before the monsoon planting season. around June.

“Agriculture in rural areas has already slowed down and the impact will be huge over the next season,” Khin said. “Bean suppliers and chicken farm owners are not sure they can start another cycle.”

The trade chain has come to a halt, a prominent rice trader who works with hundreds of Burmese farmers told Reuters. This trader said he did not have the money to buy rice from the farmers, which means that the farmers did not have the money to buy equipment or pay workers to produce the rice.

Many loans from private banks have been secured against real estate in Yangon, where house prices have plummeted since the coup, according to Myanmar economic analysts.

Myanmar private banks are required to deposit a certain percentage of their clients’ money with the country’s central bank, in order to protect savings. Two bankers told Reuters their banks deposited more than needed, but were denied permission from the central bank to withdraw any excess, leaving them strapped for cash to distribute to customers.

A banker at a major Burmese bank said that closing branches in the first two months after the coup had prevented a rush on the banking system with a rush to withdraw savings. “It was a good thing that the branches weren’t opened,” said the executive. “If the branches were open, we wouldn’t have enough money to pay.”

Reporting by Thu Thu Aung, Shoon Naing and Antoni Slodkowski; Additional reporting by Simon Lewis and David Lawder in Washington, Poppy McPherson in Bangkok, Aradhana Aravindan, Anshuman Daga and Chen Lin in Singapore; Editing by Bill Rigby