Thursday, July 27, 2017

K10,000 note debuts amid transparency concerns

The introduction of a new note always comes some uncertainty in the Myanmar market. Yesterday, the first day the newly-redesigned K10,000 note entered circulation, concerns that the note will fuel inflation came up again – though were more muted than on previous occasions.

A person handles the new K10,000 notes yesterday.Photo:Aung Htay Hlaing / The Myanmar TimesA person handles the new K10,000 notes yesterday.Photo:Aung Htay Hlaing / The Myanmar Times

The Central Bank of Myanmar’s new version of the note has more security features and is more durable. The old-style K10,000 note can still be circulated.

Economist U Hla Maung said the introduction of new notes rouses peoples’ suspicion as there are rumours that the note is in response to counterfeiting.

The growing budget deficit has also led to uncertainty, as it could climb as high as K3 trillion in the current fiscal year, he said.

“The government had better make clear the true story,” he said.

U Soe Thein, former deputy director general at the Ministry of Finance, said the Central Bank is responsible for offering notes in a safe and secure way.

“Money printing isn’t a problem, but it is not the proper time [to introduce a new note] when inflation happens and the economy is weak as well,” he said. There is also a connection in the general public perception that a new note means the government is printing more money, which leads to inflation. “People know the government prints money depending on new designs, yet people also don’t know [how much] printing with an old design,” he said. “Rumors and peoples’ worry also fuel the flame of rising commodity prices.”

Ministry of Commerce advisor U Maung Aung said previous misunderstanding over the Central Bank’s intention has caused commodity prices to spike.

The new notes will gradually replace old notes, which will be taken out of circulation, therefore not unduly increasing the money supply, he said. “People have to know this to protect against inflation.”

U Maw, marketing general manager of Aung Thamardi gold shop, said people hurriedly collected huge amounts of gold when the K5000 note was issued in 2009, as they thought inflation would follow.

“I remember that, on that occasion, inflation wasn’t up as people suspected,” he said.

Gold is also different than most commodities as it is determined by international prices and the price of the dollar, rather than local factors, he said.

U Maw added that gold shops realise the new Central Bank note is to protect against counterfeiting instead of unduly printing money.