June 22, 2012
By Aye Thidar Kyaw and Aung Kyi
EXCHANGE rates for dollars and Foreign Exchange Certificates are surging upward following last week’s announcement that a K10,000 note would be released on June 15, sources said last week.
However, several sources said the fact that black market money changers were offering rates higher than the official currency exchange counters could block efforts to unify the different exchange rates.
Since March 15, 11 local private banks have been taking part in daily currency auctions with the Central Bank, which are published on the bank’s website. Once a rate is determined the banks are allowed to trade at plus or minus 0.8 percent of the bank’s rate. Furthermore, if the Central Bank chooses a bid from one of the private banks it could buy direct.
The Central Bank’s rate on June 14 was K846, the maximum gap between the buying and selling rates for dollars was about K14. Official currency counters were buying dollars for K843 and selling them for about K855, while the black market was offering K855-860.
“It seems that some of the exchange counters are taking advantage of the plus or minus trading bracket and we will face difficulties in future if we don’t make this policy clear,” a Central Bank spokesperson in Yangon said.
But he said if banks could find a balance they would be able to compete with the black market.
He added that if the Central Bank did not announce a daily rate as a reference for private banks the currency exchange system could quickly fall into disorder.
“We need to take notice of events that affect black market exchange rates, such as the announcement of the K10,000 note on June 8, which pushed exchange rates to K860.
“But the black market rate should never be much higher than the Central Bank’s daily rate,” he said.
U Wunna San Maung, the managing director of a travel agency in Yangon, said his company never bothered with the official exchange counters.
“We’ve heard plenty of stories that the counters limit the amount people can change and impose other restrictions so we always just save time and go to the black market,” he said.
He added that if the official exchange counters changed their policies regarding the acceptance of old or torn notes and were more flexible on the amounts they changed people would be more interested in using them.
An employee at the Myanma Industrial Development Bank’s exchange counter on Thein Byu Road said on June 13: “We’ve run out of Foreign Exchange Certificates [FEC] and dollars and our sales are closed but we are buying FEC or US dollars if you would like to sell.”
An employee at a nearby Innwa Bank counter said: “We have run out of FEC but dollars are still available. But we’re selling dollars only to customers who would like to import a car.”
“Customers who want to buy dollars from us need to bring their foreign currency account books,” she said.
U Htay Myint, who came to the Thein Byu counters in search of dollars, said the he had never needed to bring anything more than his National Registration Card and currency when buying dollars or FEC in the past.
“In previous months anybody could come here and buy whatever currency they needed with nothing more than their identity card, this is the first I’ve heard of account books,” he said.
“The exchange counters are setting different regulations at different times without giving prior warning to customers. This is not the way they should act,” he added.
When handling deposits intended for car imports Myanma Foreign Trade Bank (MFTB) and Myanmar Investment and Commercial Bank (MICB) are only accepting notes that come with receipts showing they came from official exchange counters, he said.
“MTFB and MICB staff are refusing dollars that have small imperfections, stains or fold lines but are accepting FEC with few complaints, which means people are trying hard to get FEC,” he said.
Another factor further fuelling demand for FEC is a Directorate of Road Transport requirement that only FEC be accepted for payment of licensing fees related to imports, he said.
However, potential buyers such as U Win Naing left the counters empty handed on June 13.
“I came to the Thein Byu exchange market to buy FEC for my car licence fees but I could not buy any from the six private banks,” he said.
“I have no choice but to look on the black market instead,” he added.
U Zaw Lin Htut, a spokesperson at Kanbawza Bank’s exchange counter, said: “We can’t be as flexible as the black market and we have to cover a lot of expenses but if someone wants to exchange a large amount we’re willing to cut our margins back.”
He said that the counters receive plenty of business from big trading companies and INGOs, while those looking to change smaller amounts use the black market because it was not worth the extra effort for relatively small sums.
“This system is still just beginning to be used and we need more experience to offer better services and remove the black market money changers who manipulate the market,” he said.
Gold prices have also been rising as a result of the K10,000 denomination: A tical (16.25 grams) of gold was selling for about K728,000 on June 14, up from K697,000 on June 1, said U Win Naing.
Photo Credits: The Myanmar Times