Naypyidaw starts new currency regime

MYANMAR yesterday began a managed flotation of its currency, overhauling its complex exchange rate system in the new government's most radical economic reform yet.

The central bank set a reference rate of 818 kyat to the dollar, according to an announcement on its website. The move brings the official currency rate in line with its value on the black market of about 800 to the greenback. The move is part of burgeoning reforms to modernise an economy left in disarray by decades of military rule and isolation.

Announcing the move last week, the central bank said the managed floating exchange rate would allow market forces to determine the value of the kyat while leaving room for it to influence the unit's value.

Analysts said the simplified currency regime would help facilitate trade and investment as Myanmar gradually opens up. "Establishing a transparent and unified exchange rate is a first, but vital step in building confidence in the kyat, and hence the economy," Vishnu Varathan, an analyst at Mizuho Corporate Bank in Singapore, said.

"This helps provide comfort on the stability of returns on investments as well as offer some degree of principle protection."

AFP