Myanmar exiles seek virtual currency backed by $1.4 billion at US Federal reserve

The Central Bank of Myanmar said it would sell US dollars for the first time in nearly six months to help bolster the kyat. PHOTO: REUTERS

YANGON - Myanmar exiles ousted in a 2021 coup are pressing the Federal Reserve to endorse their bid to use US$1 billion (S$1.4 billion) in funds frozen by the US to back a digital currency and a plan to establish a new central bank.

It's a long-shot measure to help the shadow government led by allies of deposed leader Aung San Suu Kyi bolster its support amid a worsening economic and political crisis in the country sparked by last year's military coup.

"We just need the US blessing that allows us to use the frozen money virtually," Mr Tin Tun Naing, the exiled National Unity Government's minister of planning, finance and investment, said in a video interview with Bloomberg News from an undisclosed location.

The amount sought by the exiled opposition leaders is part of Myanmar's reserves that have been frozen by the Federal Reserve Bank of New York since February 2021, when the country's armed forces seized power from the democratically-elected government.

If the exiles can get US support, they would then seek to establish a new central bank that could issue the digital currency to help support the opposition's "revolutionary efforts," Mr Tin Tun Naing said. He described the plan to issue currency against the reserves as a more feasible alternative to asking the US to free the cash entirely.

"We know perfectly well that the US is not going to release it in the foreseeable future but we are aiming at making use of these frozen assets virtually," he said. "This means that we will use this as our foreign reserves when the Central Bank of NUG is established."

The National Unity Government - largely made up of lawmakers and officials who won elections in 2020 - has shown an ability to creatively raise funds to sustain its operations outside Myanmar. The party has sold what it calls "Spring Revolution Special Treasury Bonds", and held a mock auction of two mansions owned by junta leader Min Aung Hlaing and his family that raised about US$53 million.

The US Treasury Department, which helps enforce sanctions, directed questions to the Federal Reserve Bank of New York. A spokesperson for the New York Fed declined to comment. Major General Zaw Min Tun, lead spokesman for Myanmar's State Administration Council, didn't answer calls seeking comment.

The balance of Myanmar's foreign-currency reserves - believed to total in the low billions of dollars - are in Singapore, Thailand and Japan, Mr Tin Tun Naing said. Officials with the central banks in those three countries declined to comment when asked about their holdings of Myanmar assets.

There is some precedent for the exiles' bid. In a effort to pressure Venezuelan President Nicolas Maduro's regime during the Trump administration, the US granted the country's internationally-recognised "interim president", opposition leader Juan Guaido, access to key government bank accounts based in the US.

The goal of the US move was to "help Venezuela's legitimate government safeguard those assets for the benefit of the Venezuelan people", State Department deputy spokesman Robert Palladino said at the time. But it was never clear how much money was in the accounts granted by the US and the effort to oust Maduro soon stalled.

Even if Myanmar's exiled opposition can secure US support, there remain significant hurdles in the exiles' plans. Despite lacking international recognition and facing a weakened economy and clashes with armed ethnic groups, the junta shows few signs of backing down.

The junta has sentenced Suu Kyi, 77, to 20 years in prison, with eight more charges pending verdicts expected later this year. The Nobel Peace Prize laureate has denied all charges, which her supporters have said are politically motivated. Economically, the forecast is just as dire.

Multinational companies including TotalEnergies and Chevron pulled out of their decades-long investments in Myanmar this year following international sanctions led by the US and its allies. The country's currency, the kyat, has tumbled 37 per cent against the dollar since the February 2021 coup, among the most in the world.

The Central Bank of Myanmar early this month said it would sell US dollars for the first time in nearly six months to help bolster the kyat. Last month, the bank changed the reference exchange rate from 1,850 to 2,100 kyat per dollar as the national currency continues to weaken. But a huge gap remains between the official rate and market price.

International organisations including the International Monetary Fund and World Bank said they don't have the latest data on Myanmar's foreign exchange reserves.

Commerce Minister Aung Naing Oo said in a response to Bloomberg News queries that Myanmar's foreign reserves have improved a bit, compared to US$6.04 billion recorded last October.

While the economy is expected to rebound from last year's 18 per cent contraction, the World Bank said in July that a "decade of progress on poverty reduction has been undone" with poverty doubling since March 2020.

"There is no clear path out of this crisis," Dr Noeleen Heyzer, the UN secretary-general's special envoy for Myanmar, said at an event on Sept 5 in Singapore. "There will be no easy solutions." BLOOMBERG

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