Long lines of people behind trucks selling cooking oil are a common sight on the streets of Yangon these days. Since July last year, residents have been standing like this, ignoring the intense heat, sun, and rain, to buy oil at wholesale prices in Myanmar’s commercial capital. Oil from such trucks fetches 3,000 kyats (about Tk 149) per kg, almost double the price when bought on the open market. Still, the price of edible oil bought from trucks is about 50 percent higher than a year ago.
The kyat is currently trading at a third of its pre-coup value. This is a major disaster for a country that depends on imports to meet its demand for products such as palm oil, gasoline, and medicines. The World Bank says 40 percent of Myanmar’s population now lives on less than $4 a day (in 2017 prices). The military junta destroyed nearly a decade of economic development under the quasi-civilian rule in the country.
But instead of taking responsibility for the crisis, junta chief General Min Aung Hlaing advised people to eat less. He is not satisfied with the amount of oil used in cooking the curry. But this is just an attempt to cover Hlagenuines genuine concern. His main concern is Myanmar’s current account balance.
The junta wants to boost the country’s “internal energy” and balance payments by reducing consumer demand, boosting domestic production of oil crops, and reopening closed state factories. But the generals’ policy of protecting Myanmar’s economy from international sanctions and isolation seems insane. Before that, the country needed massive political and economic restructuring in the wake of the military coups in 1962 and 1988.
The junta leaders’ first announcement immediately after this coup was that the state of emergency would last for a year. It was later extended to two years and new elections were promised. But the military junta was completely unprepared for the nationwide protests. They had no plan to deal with the inevitable economic collapse after the coup.
The country’s central bank sold about $600 million (about 10 percent of its total reserves) to Myanmar’s foreign exchange reserves to counter the initial devaluation of the kyat. But even in Afundsserves continued to decline. Because foreign investment, aid, and remittances – all went down and commodity prices rose. In this situation, the junta government tried to increase reserves by imposing capital controls and import restrictions.
But this move created a shortage of imported essential items, including diabetes and cancer drugs. Many stopped trading after the government imposed an obligation on exporters to convert foreign currency profits into kyats at rates set by the government. Some even decided to keep the profits abroad instead of losing some of their income to the junta government.
Later, the generals admitted their responsibility for the chaos by easing some restrictions. In mid-August, the junta government announced that exporters could keep or use a third of their foreign earnings to buy kyats at market prices.
But the assurance markets need for business profitability probably won’t come from a military junta. Last June, Hlaing appointed six of his lieutenant colonels to senior positions at the central bank. Lieutenant General Mo Myint Tun, close to the junta chief, is now chairman of the Investment Committee and auditor of the commission that oversees trade and foreign exchange.
Efforts at economic management create places of patronage. Min Aung Hlaing may hope to rebuild the wealthy class as a supporter of Myanmar’s previous junta. But that will be very difficult, says Gerard McCarthy of the National University of Singapore.
Wealthy traders who have spent ten years diversifying their portfolios do not want to fall into another junta trap. Moreover, there is not much to bet on as this government says it is stepping down and continues to face resistance from ethnic and pro-democracy guerrillas. If the rebels succeed, the junta allies fear punishment.
You can’t create a whole new business class owed to one or two generals, McCarthy said. As long as the junta government doesn’t try to move to a new electoral administration or collapse along the way, it looks like the existing business elites will slow down.