Kyat’s Black Market Rate Hits New Heights

The black market value of Burma's currency, the kyat, hit new heights on Tuesday, continuing a trend that began last month.

Currency dealers in Rangoon and Bangkok reported rates of 950 kyat to the dollar and 27 kyat to the Thai baht. From 2005, when a dollar cost just 880 kyat, until last month, when the going rate was 1,190 kyat, the Burmese currency had shown only persistent weakness.
 
Currency dealers attribute the rise in the value of the kyat to a number of factors, including a fall in border trade due to weak demand for products that are usually bought with hard currency. As more Burmese decide they can’t afford those goods, their need for foreign currencies—the dollar, the Thai baht and the Chinese yuan—has also decreased.

Another factor advanced by currency dealers is that Burma’s foreign currency reserves in the junta's Central Bank have reached US $3 billion, thanks mostly to the country’s trade surplus, particularly with Thailand, which is the major importer of Burma’s natural gas.

Aid money could also be an additional factor. According to the UN Office for the Coordination of Humanitarian Affairs, nearly $500 million has already been transferred to Burma for relief programs in areas hit by Cyclone Nargis.

Last week, the Tripartite Core Group—representatives of the UN, Asean and the Burmese junta—announced a 3-year Cyclone Nargis recovery and preparedness plan that will require $691 million.

Analysts said Burma’s exports will suffer, as foreign buyers balk at higher prices for Burmese goods, especially amid a global slowdown that has hit demand from some of the country’s key trading partners, including China, Thailand, Singapore, India and Malaysia.

As a result, currency trading through unofficial cash transfers from abroad known as hundi have decreased dramatically.