The gap between the exchange rates offered by the black market and official money changers has narrowed to less than 1 percent in the nine months since the Central Bank of Myanmar began a managed float of the kyat, industry sources said last week.
The Central Bank began establishing a formal foreign exchange market that it could intervene in when necessary in April 2012, beginning by holding daily foreign currency auctions with domestic banks that set a daily rate. The banks were then allowed to offer a rate 0.8pc above or below the Central Bank’s rate.
Before April, the bank had allowed private banks to set up official money changing counters in Yangon to assist foreigners and Myanmar to change money. This network has been extended to include airports, shopping centres and banks in other major cities.
“When the first exchange counters were opened the gap between the rate offered at official exchange counters and the black market was significant – sometimes K20-30 a dollar but over time it has stabilised,” a Central Bank official said.
He added that the Central Bank’s decision in December to offer non-bank money changer licenses had encouraged a number of black market money changers to enter the legal fold, and had shrunk the capacity of the black market.
On January 17, the Central Bank’s daily rate was K858 for US dollars, while Foreign Exchange Certificates were trading for K862, Asia Green Development bank’s website said.
The black market was offering K855-858 for each.
U Win Myint, a money changer in Kyauktada township, said the exchange rate is stable because gold prices are also firm. He added that his counter is receiving plenty of customers.
A week ago, the FEC value increased by about K5 following confirmation that vehicle importers and sailors must continue to use FEC, even though supplies of the currency are dwindling.
“Nobody dares to keep FEC because it has been announced that it will be withdrawn and we don’t know when,” he said.
Since the Central Bank announcing that non-banks could open exchange counters more than 100 applications have been lodged, the official said.
Two companies were granted permission to open counters in January: Farmer Phoyarzar Company, which has opened branches in Chan Aye Thar San township in Mandalay, and at the Chatrium Hotel and on Bo Myat Tun Road in Yangon. And Today Topstar company will open a counter in Myawaddy in Kayin State.
Farmer Phoyarzar is a trading company and its executive director for the money changing operations is U Kyaw Kyaw. He said the all money changers must follow the same rules, regardless of who owns them.
“I think opening non-bank money changers increases competition and I hope it will see the black market gradually fade away.