Currency slide hits Myanmar's import businesses

SINGAPORE • Shopkeeper Kyaw Swar Tun grimaces as he tallies the day's sales in his small electrical appliance store stacked with imported goods in Myanmar's biggest city of Yangon.

"There's been no shopping anywhere, only window shopping," the 45-year-old exclaimed, throwing his hands in the air as he sat behind a wooden desk. "Business is no good for anybody because dollar prices are up."

The 19 per cent slide in Myanmar's kyat versus the United States dollar this year has increased the cost of the refrigerators, microwaves and air-conditioners that Mr Kyaw imports, forcing him to raise prices.

BAD FOR BUSINESS

There's been no shopping anywhere, only window shopping... Business is no good for anybody because dollar prices are up.

SHOPKEEPER KYAW SWAR TUN, who runs a small store selling electrical appliances in Yangon

Analysts see no end to the currency's retreat as an investment boom drives a surge in the South-east Asian nation's imports of raw materials and machinery.

"This weakening trend hasn't ended," said Mr Andrew Wood, the Singapore-based head of Asia country risk at BMI Research, part of the Fitch Group.

A current-account gap estimated at 7 per cent of gross domestic product this year and the next will weigh on the kyat, as will Myanmar's Budget deficit and quickening inflation, he said.

Foreign direct investment surged to US$8 billion (S$11 billion) in the fiscal year ended March, more than five times the total for the 2012 to 2013 period, and the International Monetary Fund estimates that the consequent jump in imports boosted the trade deficit to US$5.2 billion.

The central bank is seeking to halt the currency's drop by preventing hotels, restaurants and airlines from charging in dollars.

"There has been dollarisation leading to an increased need for dollars, weakening the kyat and causing exchange rate instability," the authority said in a statement on Oct 16. The kyat traded last Friday at 1,277.5 per US dollar in Yangon. 

The Asian Development Bank sees the economy expanding 8.3 per cent this year and close to that next year.

The businesses being hit hardest by the kyat's slide are those importing products from international manufacturers and selling locally, said Mr Melvyn Pun, chief executive of Myanmar property developer Yoma Strategic Holdings, which is listed in Singapore.

Said Mr Myo Htun Kyaw, manager of a family-owned computer sales shop: "People always complain about the price because last year they were buying laptops for 300,000 kyats (S$351) and now they are over 400,000 kyats because of the exchange rate. We are not selling much now because the prices are high, very high."

BLOOMBERG

A version of this article appeared in the print edition of The Sunday Times on October 25, 2015, with the headline 'Currency slide hits Myanmar's import businesses'. Print Edition | Subscribe