Myanmar announced the abolition of its US dollar proxy currency, in the latest step towards economic normalisation as the impoverished former pariah opens to the world. More than $30 million worth of Foreign Exchange Certificates (FEC) will be phased out of existence, Finance Minister Win Shein said in parliament, without giving a timeframe for the move.
The currency, introduced by the former junta two decades ago as an alternative to the US greenback – which it officially banned – is no longer required, he said.
“A scheme will be set up to systematically abolish FECs in collaboration with the Central Bank of Myanmar, government banks, private banks and related organisations,” Win Shein told MPs.
Economist welcomed the move, which was expected as part of the country’s economic liberalisation. Many government ministries conduct their financial affairs in FEC, while certain transactions involving customs – including the purchase of foreign imported cars-require the currency. The kyat is the primary currency of Myanmar and is used everywhere, although many hotels and other tourist-focused enterprises also accept dollars. Sean Turnell, a Myanmar economic expert at Australia’s Macquarie University, said the announcement could be a new test of public confidence in the government’s handling of the economy.
“In the past, movements like this have caused panics, but perhaps there is greater trust in monetary arrangements now,” he said, adding that those holding FECs would rash to convert them to dollars.
But Central Bank director general Win Thaw told AFP the move would have little impact because it is now possible for people to legitimately exchange them for dollars.
Myanmar’s quasi-cvilian regime has introduced a series of political reforms since coming to power in 2011 that have caused to West to scrap of freeze most sanctions. The country embarked on a managed flotation of its currency in April last year, while it has also drawn up new foreign investment legislation in a bid to boost its attractiveness to international business.
“Myanmar has experienced a tourism boom since 2011, making the system of foreign exchange certificates a relic of Myanmar’s past economic isolation,” said Rajiv Biswas, an economist at IHS Global Insight.