Regime Pressures Traders Not to Increase Prices

By THE IRRAWADDY

Friday, October 2, 2009

Burmese traders are under increasing pressure from the military government to keep their prices stable following Friday’s introduction of the 5,000 kyat (US $5) banknote. Most gold and currency dealers continued to suspend trading because of uncertainty about the effects of the arrival of the new banknote.

Rangoon sources say an emergency meeting of the Myanmar Gold Merchants and Entrepreneurs’ Association and the Myanmar Rice Traders Association is being held to discuss the question of price controls.

Burma's new 5,000 kyat bank notes are displayed in front of a portrait of opposition leader Aung San Suu Kyi in Rangoon. (Photo: AP)

The new banknote, now Burma’s largest denomination, began circulating on Friday through government-owned banks, chiefly the Myawaddy Bank, owned by the Union of Myanmar Economic Holdings Limited, which comprises military officials from the Ministry of Defense and war veterans.

"The bank issues the salaries for military officials and pensions for army retirees,” a Rangoon business journalist said.

It’s feared in Burma that the addition of a 5,000 kyat banknote to the country’s currency could create a spike in the inflation rate.

"A big outstanding issue is whether the issue of these notes is in addition to the existing stock of notes or not," said Sean Turnell, an economist at Australia's Macquarie University, who produces a regular Burma Economic Watch report. "If there is a net addition to the money stock because of this, then the issue of the new 5,000 kyat note will add to Burma's inflation problem. It will, after all, simply be yet more 'money printing.'"

Traditionally, the Burmese junta has never announced how much money is in circulation. The International Monetary Fund, however, estimates it to be 2,651.1 billion kyat at the official exchange rate. Burma's inflation rate run at 26 percent in 2008.

Many businessmen and economic experts believe the government is introducing the 5,000 kyat note to ease budget deficit problems created by excessive spending. They point to the huge costs involved in building the new administrative capital, Naypyidaw, the development of a planned cyber city, Yadanabon, the planned nuclear research reactor and the construction of tunnel complexes in Naypyidaw and other strategic sites.

There are consistent reports that the junta is keeping the Naypyidaw building contractors waiting for their money. "Now the military government would be able to pay their debt comfortably," a Rangoon-based businessman said.

Meanwhile, Burma's censorship board, the Press Scrutiny and Registration Division, has banned any critical or analytical press reports on the issuance of the 5,000 kyat note. "The censorship board allows us to print articles if they have a positive angle," an editor told The Irrawaddy.

COMMENTS (3)

KKK Wrote:

05/10/2009

Than Shwe is broke! He is "Nga Mwe" now. There is no way he can pay his debt without printing new banknotes. Than Shwe's plan is to invest the dollars in China and Singapore banks and pay the debts with new banknote. Where did the SPDC spend billions of dollars from gas and other natural resources? Building new capital and tunnels for his safety? Look at Burma's infrastrature, healthcare system, education system. We don't see any progress at all. No doctors, nurses, drugs or equipment in hospitals. No qualifed teachers, advanced textbooks, school supplies in schools and universities. We Burmese people are living without electricity, healthcare, proper education system, transportation, and communication system. It is a lot worse than 40 years ago. What can the SPDC provide the Burmese people? Nothing. Why do Burmese people keep Than Shwe and his thugs alive? Because Burmese people are not as brave as Lebanese and Taliban women? Don't ask help from the US and the EU. Don't wait for your messiah.

Yangontha Wrote:

03/10/2009

I wonder why Than Shwe did not put his picture on the note. Perhaps, no human look alike of his picture is available!

Tom Tun Wrote:

03/10/2009

There are more effects than the article describes.

Burma is located between 2 rapidly growing giant countries, China and India. The trading effects from those 2 countries can destabilize Burma's economy. Burma's border lines are not very secure. There is a lot of illegal trading going on. Illegal trading benefits individual traders but not the country.

Burma's tax system is a joke, the majority of citizens don't even know how it functions. Cash flow of Burmese banking system gives heart attacks time after time.

Only one thing can be useful for the country is the CYBER CITY, even that project no one knows if it is to spy on the citizens or to support government operations.

Printing more bank notes every time the government runs out of money is not new. 1988 uprising took place because of that. We still remember 25, 45, 50, 100 bank notes.