To state that various countries around the world are facing economic fallout will be an understatement. In a recent turn of events, Myanmar finds itself at the crossroads of fighting two battles: the covid crisis and the economic crisis in its nation. Due to its economic crisis, Myanmar’s currency has suffered, so much so that its value has lost more than 60 percent. What is more astonishing is the fact that such a decrease in the value has been witnessed since the beginning of September. To access the seriousness of the collapse, it is to be noted that fuel and food prices in the economy have increased tremendously.
The reason for such powerlessness of Myanmar
It is to be noted that the economic fallout that is being witnessed in Myanmar is not due to wrong or ill-omened fiscal or monetary policy but due to various political reasons. Eight months ago, Myanmar had witnessed a military coup that had sparked nationwide protests which were reportedly suppressed.
Richard Horsey, a Myanmar expert at the International Crisis Group is of the opinion that the current rate of economic fallout will effectively rattle the generals. This will be due to the fact that the generals are quite obsessed with the kyat rate as a broader barometer of the economy. How this will reflect on the government they are trying to set or them will make such economic fallout quite crucial for the generals.
Such a claim can be corroborated by the fact that in August, the Central Bank of Myanmar, under the leadership of generals had tried tethering the kyat at 0.8 percent either against the dollar. But such a policy was to be given up due to the pressure on the exchange rate that was mounting up.
Foreign exchange debacle
Due to the economic fallout, the economy is facing repercussions. It is to be noted that the country is effectively facing a shortage of foreign exchange. This is to means that the shortage of dollars has presented a problem for many in the economy. The economic situation has been extremely battered as many money or currency exchangers have effectively pulled down the shutter on their shops. The main reason for this can be also attributed to the fact that the currency price is quite unstable at the moment.
To analyze the statistics over time, it has been discovered that the exchange rate currently stands at the rate of 2,700 kyats per dollar compared to 1,695 Kyat per Dollar that was being traded on Sept. 1. The data is to be scrutinized further, in the month of February kyat per dollar was being traded at 1,395. This was when the military had overthrown the democratically elected government that was being strategically led by the Myanmar leader and Nobel Laureate Aung San Suu Kyi.
The dim future of the economy
With the gloomy current state of the economy, are there any chances for its revival? According to the World Bank, the economy is strongly predicted to slump by 18 percent for the current financial year.
The main reason that was provided for such a gloomy prediction is the ongoing pandemic that has wreaked havoc on the economy. With the fall in the exchange rate that is severely affecting the economy, stating that the currency is losing its value at an exorbitant rate, it is to be noted t5hat Myanmar is also witnessing the biggest contraction in employment in the region. With economic uncertainty, pandemic, unemployment, and falling exchange rate in the economy, it would be quite apt to state that the income discrepancy in the economy will only aggravate.
The unstable political environment
But how exactly is the military coup in the country affecting its economy? Firstly, non-competent leadership with political instability is to be blamed for the economic state. Secondly, with no competent government, one cannot certainly expect sagacious economic policies. On the other hand, the increasing economic pressures are also being felt amid serious signs of an upsurge in bloodshed in the country for the re-establishment of democracy. Thus, one can quite rightly state that the worse the political situation is in the country, the worse state the economy will witness.
On top of incompetent leadership and political crisis in the nation, Myanmar is also battling with the pandemic. The second wave of a virulent disease, in particular, has made the economic and healthcare situation in the country worse. The health woes of the country have been exacerbated particularly due to the fact that many health workers have joined protests against the authorities.
The panic amongst investors
It is to be noted that high panic amongst the citizens too had led to such fallouts. According to the reports, In the immediate months after the Feb. 1 coup, the public had emphatically withdrawn its savings from banks in the economy. In fact, Gold too was bought in a large amount.
Given that no concrete evidence and information is available, many analysts believe that the central bank’s withdrawal of its managed float strategy may be due to the depletion of foreign currency reserves.
The economic woes
It is to be noted that the economic crisis has led to a surge in the prices of staples. In fact, the economic woes of the country have been exacerbated to such an extent that the United Nations Office for the Coordination of Humanitarian Affairs has emphatically stated that at least three million people would effectively and urgently require humanitarian assistance in Myanmar. To put these statistics in perspective, it is up from one million that was recorded before the coup.
Edited by Sanjana Simlai.