The shortage of money threatens Myanmar’s banking crisis

Queues at ATMs arise early, often before dawn. He brings people to carry plastic chairs or chairs or mats. As the sun rises higher, they protect themselves with umbrellas or embrace the shade and wait.

Myanmar is short of cash. Since the military flip With Aung San Suu Kyi’s government in February and tens of thousands of people leaving work, banks have put a limit on withdrawals to gather crowds at branches every day.

According to the bank, foreign observers and employers, the country’s central bank is not providing enough money to banks on demand. Most spoke anonymously to the Financial Times, fearing angering the regime, which has arrested more than 5,400 people since the coup, according to the Human Rights Political Prisoners Support Association.

The cash flow is one of the clearest signs that Myanmar’s economic and banking system, which is gradually resuming work after the general strike following the coup, remains fragile.

“We don’t trust the military junta because they don’t show us any confidence,” said Nicky, a 19-year-old writer and volunteer doctor who lives in Yangon, and asked not to mention his full name. “So we have to get our money back.”

In recent days, Nicky has been taking money from a KBZ family account, the largest bank in Myanmar, which has been repeatedly paid, as the bank limits the removal of 200,000 Myanmar kiaat ($ 120) per day from the bank.

A sign of the seriousness of the problem is the rise of the parallel market for money, where a person signs a bank transfer or check with a discounted amount in exchange for a paper given by a second: for example, 9,000 kiat in cash in 10,000 Kyat deposit.

“People realize that even if you transfer money, it’s almost impossible to get the money out,” a banker told FT. “So the money in the bank is at a discount.”

KBZ declined the interview request. However, Myanmar’s largest bank said in a written statement that most of its branches “have reopened and are functioning to support the livelihood of the people of Myanmar. Most of the staff have returned to work to help people with their economic needs.”

Banks, like other private companies, have carefully chosen words, juntas, or anti-junta camps to plan actions to anger them since they struck. boycotts businesses controlled by the military or non-military that are seen towing the junta line.

It seems that the physical shortage of banknotes is a cause for the reduction of money. Giesecke & Devrient, a German company that supplied raw materials and components for the production of Kyat invoices to the security printer of the state of Myanmar, was suspended in late March. The company said the stoppage was in response to “ongoing violent clashes between the army and the civilian population.”

The lack of bank staff and the fact that the regime does not believe in its ability to manage the economy also seem to matter.

Work trips paralyzed bench in the weeks following the coup. Bank staff and officials, including the Central Bank of Myanmar, went on strike, forcing many offices to close.

Since April, most banks have reopened, along with factories and other businesses. The Yangon-based business has seen an increase in traffic in the capital, which some believe is part of a partial economic recovery.

However, the hard money remains tight. Banks have placed increasingly stringent restrictions on ATMs and have set up token systems to limit the number of customers who make reverse transactions.

The central bank has cash reserves on hand, according to bankers and analysts, but does not provide enough banks to meet demand. “There’s a bit of money circulating, but not a lot,” said a diplomat from western Yangon.

Many in Myanmar have been trading their kyata for gold or dollars when they both won the coup.

Although the shortage of money has yet to cause a crisis, analysts say long-term problems securing money for businesses and banks could make smaller banks vulnerable, jeopardizing a sector that has long struggled with bad loans.

“Myanmar’s banking sector has been in crisis since the introduction of new precautionary regulations in 2016 and the real estate market collapsed almost simultaneously,” said historian and author Thant Myint-U.

“Since the coup, the banking crisis has intensified due to the February and March strikes, the inability or unwillingness of the central bank to provide the necessary liquidity to save money at home, and the general collapse of confidence.”

In remarks published in the Myanmar government’s Global New Light publication, Min Aung Hlaing, the head of the board, noted the money laundering. He said the regime is keen to “expose those who have large sums of money in their hands”.

Myanmar’s National Union government, made up of supporters of Aung San Suu Kyi, said the junta alone was to blame. “The people of Myanmar do not believe that the junta has the capacity to manage the country’s economy,” Tin Tun NaingIn the parallel administration the Minister of Finance said.

“We can’t blame them for the disappearance of their savings.”

Twitter: @JohnReedwrites