KYAT TURMOIL

In July the Burmese kyat declined from 185 to 280 to the US dollar. Then, it fell to 300 kyat. The sudden plunge has created chaos and confusion for local and foreign traders. As there was no independent business reporting on the sudden currency turmoil the price of foreign imports skyrocketed. A Toshiba TV on sale at a shopping centre nearly doubled to 25,000 kyat from 13,000 within a week. Last year the kyat was trading at 160 to the dollar. Then it dropped to 200. "Usually, every Friday morning the rate will decline but in the evening it returns to normal but this time it looks like it is going to be over 300," said a trader in Rangoon. At first, it was rumoured that the kyat would decline to 400 kyat per dollar before the end of the year. The official rate is six kyat per dollar. Burmese inside Burma are not allowed to hold foreign currency and in its place must use Foreign Exchange Certificates (FECs). Kyi May Kaung, a US-trained political scientist wrote in a recent article: "No one knows exactly how many FECs have been issued. Late last year the official word in Rangoon was that FECs made up nearly three per cent of the currency that circulated at the market exchange rate." However, merchants in Rangoon speculated that the authorities have printed more than 20 times as many of the paper certificates. One report said the military government was looking to buy FEC with kyat. Additionally, many local businessmen in Burma are convinced that the government will devalue the kyat in the near future. In downtown Rangoon, the May shopping market at Pansodan Street suddenly shut down shortly after the kyat plu-mmeted. Rumours began circulating that well-known businessmen were being apprehended. One of them was Thein Htun, better known as Pepsi Thein Htun, due to his control of a Pepsi dealership. It was believed that a few weeks ago Thein Htun withdrew a huge amount of money from the bank. The authorities said that businessmen were summoned for questioning but nobody was detained. As panic gripped traders the government denied rumours that it would void 200 and 500 bank notes. But the announcement only made matters worse. Shortly after, the price for vegetables, rice, oil, gold and petrol increased 10 per cent. One viss of chicken now sells for 700 kyat up from 600 kyat the week before the currency turmoil. Many shops at Mingala market shut down as shopkeepers refused to accept 200 and 500 notes. Those looking to save money ran to gold shops. Many businesses in Mae Hong Son are refusing to accept Burmese kyat notes because there are so many fake kyats in circulation. Sources said the traders were refusing to accept notes after learning that the Burmese authorities were going to void 500kyat notes marked with the serial letters AL and AM. In 1987, the then socialist government demonetised the 25, 35 and 75 bank notes without compensation even though it denied it was planning to do so. "The kyat is worthless, yesterday it was 15 kyat for a cup of tea. Today it is 18 and they say it will be 20 soon," said one trader. Instead of solving the problem, the Slorc denied all the devaluation rumours and said rumour-mongers were trying to damage the country’s economy. Burma’s military intelligence chief, Lt-Gen Khin Nyunt, said, "Rumours about financial and economic matters afloat today are totally untrue and this has been concocted by destructive elements." The rumour-mongers, the general said, were taking advantage of the public’s lack of knowledge about Asean to spread false information in an attempt to deprive Burma of the economic benefits it would enjoy once it joined the grouping. But Burmese are not convinced. A government office worker said his salary is now 1,500 kyat, compared to 220 kyat in 1987. "Before [in 1987] it was quite okay with 220 kyat. Now I can not feed my family since my salary increased." But Thailand-based political activists believe that the Burmese generals will lose their battle with the economy. "This is because they have no knowledge of how to run an economy. They only how to shoot," said student leader Moe Thee Zun. A few months ago, two giant hotels, the Sedon and the Traders in Rangoon laid off about 400 of their employees because of the lack of visitors. "We have no jobs–our families depended on us," said a former receptionist at the Hotel Sedona. But local traders in Rangoon also said they believed that Thailand’s recent de facto devaluation had a major impact on the Burmese market as well. "This is something they cannot control — as the value of the kyat declines the government will have no choice but to devalue the currency in the near future," said one economist in Rangoon. Contributed by a correspondent.