After an insane August which caused Myanmar Kyat (MMK) to take a nosedive in value, superb September witnessed a stronger MMK. While the MMK value was still lower than the previous norm of US$1 for MMK2,800, i.e. before the latest stunt of printing MMK20,000 banknotes pushing towards US1 for MMK4,000 in August (three times pre-coup levels), exchange rates at the end of September were around US$1 for MMK3,300. At a glance, as far as the money side of the economy is concerned, the economy is showing signs of recovery, or at least arrested decline.
However, the goods and services side of the economy shows a completely different picture. With such a “stronger MMK” achieved through arrests, threats, and intimidation through September, the market ran to a halt. Trading of essential items from consumer goods to industrial inputs becomes so limited in the market. Businesses were finding it more difficult to get essential industrial inputs such as fuel and edible oils. Worse, in the streets of the economic capital, Yangon, the long queues of urban poor waiting in line for discount sales of rice and edible oil become a daily report of mass suffering due to chronic mismanagement and general apathy towards public well-being since the coup. A less visible, yet no less devastating, crisis falls on those requiring long-term medication and other essential items.
Since the coup, the humanitarian crisis has intensified across the country. In rural areas, villages getting bombed and burned have become daily occurrences. In the cities, while such a degree of atrocities is yet to come, rampant crimes, lawlessness, and economic hardships were all in plain sight. In 2021, UNDP announced urban poverty rate was expected to triple by early 2022 due to coup-related impacts. By the time UNDP released that report, the conflicts were not this encompassing, US$1 equals around MMK1800, and surely there was no need to queue for rice and cooking oil in cities.
The huge development over the last month was the arrest of top regulators entrusted with overseeing the economy by junta chief Min Aung Hlaing and his administration the State Administration Council (SAC), and major businesspeople. The biggest catches were Lieutenant General Moe Myint Tun and Lieutenant General Soe Htut, with the former overseeing the Myanmar Investment Commission, Trade Facilitation Committee, and Foreign Exchange Supervisory Committee. With the junta’s rhetoric of unscrupulous merchants and corrupted officials being the roots of the decline of MMK getting fired up to the extreme during the recent drastic fall of MMK, the one person in control of trade, investment, and the right of access to foreign currency, was an easy scapegoat to demonstrate the logical correctness of his thinking, and purging of SAC top brass proved the willingness of Min Aung Hlaing to do what’s right in protecting the economy and the public wellbeing. Since the arrests, Min Aung Hlaing has often given speeches about the zero-tolerance policy on corruption and abuse of power. Junta’s propaganda machine was also seen in how the top leader’s benevolence was rendered ineffective due to corruption by people close to him.
However, the economic consequences are dire and counterproductive as discussed above. Pinning the blame on a few top officials seems like a good idea if structural reforms were to be followed immediately. However, without any attempts at genuine reform, the junta’s speeches are received as nothing but sick jokes.
Today’s mess of the economy was due to the rampant corruption and chronic mismanagement by the junta and its people since the coup. Whenever the market failures become bigger and more numerous due to excessive regulation and wanton enforcement, the junta seems to believe that “the solution to the adverse market response by excessive control is obvious: MORE CONTROL!”
Any student of economics would have agreed that it is far better to be trading at a high price than to have no trading at all. However, the junta, with all his “intelligence” and “benevolence”, achieved the exact opposite. Consequently, the decline of MMK got arrested, at the cost of market breakdowns. However, this would only be in the short term. Once the ongoing craze and arrests become abated, it is highly likely for MMK to fall further, and the trading to improve to a small degree. However, the currency value and trading volumes of early 2022, let alone pre-coup levels, would be possible only in an insane man’s dreams.
Cynically speaking, while the corruption of Moe Myint Tun is egregious, he isn’t the only corrupted person in the junta’s administration. Thus, as far as corruption prospects go, his successor to these all-important committees and commissions related to the economy, General Mya Tun Oo does not look more promising. Having said that, while corruption would still be prevalent, it would become more expensive in terms of money, time, and effort. Now that there is greater heat on these positions, bribery amounts would have to increase a lot to compensate for the risk and to pay off towards others, moreover trust-building between officials and businesspeople would now have to take longer as a vetting mechanism. All these would lead to increased prices and reduced quantity of commodities available in the market, even after the calm of this storm invited the resumption of trading in the future.
For the people of Myanmar, this means skipping meals and medications more and more frequently.