Myanmar households crippled as currency tumbles to record low Reuters

(Reuters) – A rapid depreciation of Myanmar’s currency is driving up prices of staples, including food and medicine, crippling ordinary households in the Southeast Asian country wracked by civil war and a collapsing economy.

Myanmar’s kyat has been extremely volatile in recent days, falling to a low of 7,500 to the dollar on the black market last week from 5,000 at the start of the month, according to four foreign exchange dealers. The plunge followed reports that Myanmar’s junta had printed more kyat to prop up the currency, two traders said.

“People are frantically buying (Thai) baht and selling kyat,” said a money transfer agent in neighboring Thailand, who asked not to be named.

“The only ones selling baht are those sending money back to Myanmar from Thailand.”

The kyat has since recovered to around 6,000 to the dollar on the black market, while the central bank’s official reference rate was 2,100 on Tuesday, with an online market trading rate of 3,400. But the prices of basic products have not decreased, six residents said.

The fall of the kyat, rising transport costs and disruptions to border trade have sent the cost of some medicines and food items soaring in Myanmar’s main cities in recent weeks, they said.

All six, who include traders, pharmaceutical officials, a doctor and Myanmar residents, asked not to be named fearing retribution from the junta.

“It used to cost about 25,000 kyat ($11.94) a week for our household food until about a month ago, but now it costs about 40,000 kyat,” said a 27-year-old housewife from Naypyitaw, Myanmar’s capital.

A spokesman for Myanmar’s military government did not return calls seeking comment.

Once seen as a promising frontier market, Myanmar has been wracked by violence since the military’s overthrow of an elected government in 2021, triggering an investor exodus, Western sanctions and protests that turned into an armed rebellion at the national level.

The junta has steadily lost control of vast swaths of the country of 55 million, including key trade routes with China and Thailand, and has struggled to manage the economy.

Poverty in Myanmar is more widespread than at any time in six years, and economic growth is likely to remain at 1 percent in the current fiscal year, the World Bank said in June.

“NO SYSTEM ON LOCAL”

At the same time, household incomes have fallen – after adjusting for inflation – and unemployment has widened, the World Bank said in June, underscoring growing pressures on large segments of the population.

“It’s chaotic and 100 percent caused by the regime’s economic policy and decision-making,” analyst David Mathieson said, referring to rising inflation and other economic issues.

The junta has taken a heavy-handed approach in trying to stabilize the currency and the economy.

Since June, it has arrested at least 56 people, including gold traders, foreign exchange dealers and agents selling foreign real estate, to try to stem the kyat’s slide.

With the currency falling, the cost of imported products, including essentials such as cooking oil that is brought in from Thailand, has risen in recent weeks, two grocers said.

A rise in transport costs due to a shortage of imported fuel, which led to long queues in several parts of the country last week, further affected retail prices, they said.

“The price has doubled or tripled because of transportation costs,” said a grocery store owner in Mawlamyine, a town in southern Myanmar, referring to some vegetables.

Medicines, including blood glucose strips used by diabetes patients, have become 10 percent and 30 percent more expensive in the past month, two pharmaceutical officials and a doctor said.

However, even at inflated prices, availability of certain drugs is limited due to the impact of ongoing fighting on border trade, they said.

The National Unity Government (NUG), made up of former parliamentarians and other opponents of the junta, said the military did not have an adequate plan to handle the current economic situation.

“They have no system in place and are simply printing more kyats, which is fueling inflation and creating an economic crisis like we have never seen before,” said spokesman Kyaw Zaw.

(1 USD = 2,093.7000 kyat)