Stronger kyat threatens exports, but presents import opportunities

Myanmar’s exports have come under pressure as a result of the weakening US dollar, which has made key exports such as rice more expensive in overseas markets, said U Soe Tun, a committee member of the Myanmar Rice Federation.

While the weaker exchange rate has made prices more attractive to local farmers, falling demand from foreign traders has more than offset the gains. “Its not profitable for exporters at the current exchange rate,” U Soe Tun said.

The Myanmar kyat is now at its strongest levels against the US dollar since 2018, with the Central Bank’s reference exchange rate on October 8 having fallen under K1300 per dollar. This is despite the Central Bank of Myanmar (CBM) continuously purchasing US dollars in the market in attempts to stabilise the exchange rate.In January, the exchange rate was more than K1400 per dollar.

“Some traders still have remaining contracts while others are still trying to continue exporting as there are opportunities to fetch high prices although not in huge volumes as trade is no longer profitable for overseas buyers at the current exchange rate,” U Soe Tun said.

Although the Ministry of Commerce had earlier imposed limitations on rice exports to ensure sufficient reserves for the country in case of emergency during COVID19, these have been lifted as the new harvest seasons draws near.

“As the new paddy harvest season draws near and with sufficient reserves in the country, we have allowed traders to export freely to prevent losses” said U Min Min, Director General of the Department of Trade.

According to data from the Myanmar Rice Federation, Myanmar exported over 2.5 million tonnes of rice and broken rice to over 60 countries up to September 11 during fiscal 2019-20, generating revenues of more than US$774 million.

On the flip side, it could be time for Myanmar to take advantage of the stronger kyat and raise imports of key commodities such as corn. Myanmar exports large quantities of corn to China and Thailand, and there is currently a domestic shortage of the commodity, which is used as animal feed in the livestock industry.

Last month, traders and livestock breeders requested an import permit for corn, but this was met by objections from local farmers, who fear a potential glut if uncontrolled imports are allowed.
Under the Law of Protection of the Farmer Rights and Enhancement of their Benefits, the farmers’ market and price stability should be taken into consideration, said U Ye Tint Tun, Director General of the Department of Agriculture.

There has typically been a surplus of corn in the domestic market but after more than 2 million tonnes were exported in fiscal 2018-20, there is a possibility that the crop will need to be imported back, U Aung Htoo, Deputy Minister of Commerce, told Pyidaungsu Hluttaw in August.

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Source : Myanmar Times

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