{"id":114266,"date":"2021-05-14T06:39:18","date_gmt":"2021-05-14T06:39:18","guid":{"rendered":"https:\/\/fin2me.com\/?p=114266"},"modified":"2021-05-14T06:39:18","modified_gmt":"2021-05-14T06:39:18","slug":"lines-tokens-and-money-brokers-myanmars-crumbling-economy-runs-low-on-cash","status":"publish","type":"post","link":"https:\/\/fin2me.com\/markets\/lines-tokens-and-money-brokers-myanmars-crumbling-economy-runs-low-on-cash\/","title":{"rendered":"Lines, tokens and money brokers: Myanmar's crumbling economy runs low on cash"},"content":{"rendered":"

(Reuters) – If you need cash in Myanmar, you have to get up early. Queues start forming outside banks at 4 a.m., where the first 15 or 30 customers are given a plastic token that will allow them to enter the bank when it opens at 9:30 a.m. and withdraw cash, according to more than a dozen people who spoke to Reuters.<\/p>

People line up outside a bank to withdraw cash, in Yangon, Myanmar May 13, 2021. REUTERS\/Stringer<\/figcaption>

If you do not get a token, you either have to queue for hours for the few functioning cash dispensing machines outside or go to black-market brokers who charge big commissions.<\/p>\n

The cash crisis is one of the most pressing problems for the people of Myanmar after the Feb. 1 military coup. The central bank, now run by a junta appointee, has not returned some of the reserves it holds for private banks, without giving any reason, leaving the banks short of cash.<\/p>\n

The banks themselves have been closed or open only intermittently as many staff have gone on strike to protest against the coup. Meanwhile, internet outages make online transactions difficult and international transfers have largely stopped working.<\/p>\n

That presents problems for Burmese people and small businesses as they try to navigate an economy rapidly crumbling under the country\u2019s new leaders and the collapse of tourism, one of Myanmar\u2019s fastest-growing sectors. The Burmese kyat has dropped some 20% in value since the coup.<\/p>\n

\u201cIt\u2019s now very difficult to operate a business,\u201d said Hnin Hnin, an entrepreneur in her mid-20s who supplies shampoo and bedsheets to high-end hotels. \u201cTraders don\u2019t accept bank transfers now. They want cash. So we need to find the cash.\u201d<\/p>\n

As a result, Hnin Hnin, who agreed to be identified only by a part of her name to discuss sensitive matters, has been one of the thousands of people queuing daily in front of the few functioning cash machines in major cities. Some people band together in groups of five, she said, so one person can take out money for the whole group.<\/p>\n

She has also been forced to figure out ways to pay her suppliers overseas, by making an agreement to swap money with a partner holding cash in an account in Thailand. Under the agreement, the partner gives Hnin Hnin access to her Thai baht account, so she can pay suppliers in Thailand, and Hnin Hnin pays her back with physical kyat notes in Myanmar.<\/p>\n

The central bank and the junta did not respond to requests for comment. Reuters put questions to Myanmar\u2019s four largest private banks, including Kanbawza Bank and CB Bank. They also declined to respond.<\/p>\n

It is now almost impossible to get hold of U.S. dollars or other overseas currency at regular exchange centres in Yangon, a dozen people told Reuters. Black-market traders will take online transfers in exchange for physical notes in various currencies, they said, but add a commission of up to 10%.<\/p>\n

Myanmar\u2019s private banks were in trouble long before this year\u2019s coup, at least partly because of their habit of lending money to well-connected customers who rarely bothered to pay them back, at least four bankers, including then-deputy central bank governor, told Reuters in 2017.<\/p>

Slideshow ( 3 images )<\/span><\/figcaption>

The coup and the protests against it now mean there is no functional banking system, according to Richard Horsey, an independent political analyst specializing in Myanmar.<\/p>\n

\u201cYou have a three-pronged hit to the banking system,\u201d said Horsey. \u201cThe pre-existing problems with the banks, which will be all the more difficult to resolve now; you have the economic impact of the coup which has produced a virtual hard stop to the economy without any kind of ability by the regime to manage that or inject stimulus; and then you have the banking sector strike itself.\u201d<\/p>\n

People want to withdraw cash now to buy food and other essentials, said Horsey, and also because they fear the banking system will collapse.<\/p>\n

POVERTY RATE COULD DOUBLE<\/h2>\n

The cash crisis is the most immediate sign of much deeper economic problems facing Myanmar, some experts said.<\/p>\n

Financial research firm Fitch Solutions said in April it expected Myanmar\u2019s gross domestic product to shrink 20% in 2021.<\/p>\n

The United Nations Development Programme said last month that Myanmar faces economic collapse due to the combined effect of the new coronavirus and the coup, which in its worst-case analysis could put nearly half the country\u2019s 54 million people into poverty, compared to about a quarter in 2017.<\/p>\n

\u201cIf the situation on the ground persists, the poverty rate could double by the beginning of 2022,\u201d said UNDP in its report. \u201cBy then, the shock from the crisis will have resulted in significant losses of wages and income, particularly from small businesses, and a drop in access to food, basic services and social protection.\u201d<\/p>\n

Millions are expected to go hungry in the coming months, the United Nations\u2019 World Food Programme said in an analysis published in April.<\/p>\n

Some workers have trickled back to resume their jobs at banks in the past few weeks, but financial analysts see no immediate alleviation of the cash shortage.<\/p>\n

In Yangon, the country\u2019s commercial capital, an egg and cooking oil trader who identified herself as Khin told Reuters the flow of eggs, oil and other agricultural commodities had slowed substantially and was no longer sufficient, forcing her to raise prices by 25%.<\/p>\n

While groceries are available in markets and in shops, some country analysts said they worry that farmers will not have access to seeds or credit to buy them before the monsoon planting season around June.<\/p>\n

\u201cFarming in rural areas has already slowed down and the impact will be huge in the next season,\u201d said Khin. \u201cBeans suppliers and chicken farm owners aren\u2019t sure if they can start another cycle.\u201d<\/p>\n

The commercial chain has been grinding to a halt, a major rice trader who works with hundreds of Myanmar farmers told Reuters. That trader said he lacks the cash to buy rice from farmers, which means in turn the farmers do not have money to buy equipment or pay workers to produce the rice.<\/p>\n

Many of the private banks\u2019 loans were collateralised against real estate in Yangon, where property prices have collapsed since the coup, according to Myanmar economy analysts.<\/p>\n

Private banks in Myanmar are required to deposit a certain percentage of their customers\u2019 money with the country\u2019s central bank, as a way of protecting savings. Two bankers told Reuters their banks had deposited more than is required, but were denied permission by the central bank to withdraw any surplus, leaving them short of cash to dispense to customers.<\/p>\n

A banker at a major Myanmar bank said the closure of branches in the first two months after the coup prevented a run on the banking system with a rush to withdraw savings. \u201cIt was a good thing that the branches haven\u2019t been open,\u201d said the executive. \u201cIf the branches were open, we wouldn\u2019t have enough cash to pay out.\u201d<\/p>\n

Source: Read Full Article<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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