Myanmar’s Economy Deeper in the Mire

In the past quarter, conflicts in Rakhine and Shan States have intensified, and humanitarian crises nationwide have worsened. These issues have compounded the negative impacts of the State Administration Council (SAC)’s economic policies, which seek to secure the junta’s interests through control and coercion.

The World Bank’s June 2024 issue of its biannual Myanmar Economic Monitor forecast a rise in GDP by only 1 per cent through to the 2024 fiscal year ending March 2025, while economic output would remain 9 per cent lower than pre-COVID-19 levels. The bank also warned in a separate report on Myanmar’s public finances of “a weakening of budget transparency practices”. Publication of several hitherto regular updates on government fiscal policies and quarterly budget reports has been halted since October 2023. Inflation data and select monthly economic indicators reports have not been published since August 2022.

The SAC’s partial loss of control over border-trade crossings with Bangladesh, China, India, and Thailand has exacerbated challenges for importers and exporters but opened certain economic, trade and governance opportunities for groups resisting the junta. The kyat’s continued weakening reached a market rate of 4,450 MMK to the US dollar in late June 2024, from 1,330 MMK in February 2021. The SAC’s manipulation of foreign exchange policies, which are mainly aimed at preserving the regime’s interests, has also earned it a potential US$1.8 bn in 2023 as the growing gap between rates creates arbitrage opportunities. This comes at a substantial cost to Myanmar’s overall economy.

The SAC’s militarisation of the economy continued with additional reshuffles in key economic posts and further restrictions on economic actors. Two technocrats in the SAC’s economic machinery were removed from office in late May. Aung Naing Oo was a minister in the SAC Chairman’s office and chairman of the Myanmar Special Economic Zone Central Working Committee. Maung Maung Win was the deputy minister of planning and finance.

Aung Naing Oo was a key promoter of Myanmar as an investor-friendly country as director-general of the Directorate of Investment and Company Administration during the Thein Sein administration from 2011 to 2016. He became the permanent secretary in the Ministry of Investment and Foreign Economic Relations under the National League for Democracy government. Maung Maung Win, former Exchange and Securities Commission chairman, had held his deputy minister role for over a decade.  

The SAC’s partial loss of control over border-trade crossings with Bangladesh, China, India, and Thailand has exacerbated challenges for importers and exporters but opened certain economic, trade and governance opportunities for groups resisting the junta.

On the same day, Nyo Saw, a lieutenant-general, chairman of military conglomerate Myanmar Economic Corporation, and advisor to the SAC chairman, became the chair of the Foreign Exchange Supervisory Committee. He replaced Mya Tun Oo, a general, deputy prime minister of the SAC and chair of the Myanmar Investment Commission. Mya Tun Oo had taken the role in September 2023 as predecessor Moe Myint Tun was being investigated on corruption charges.

Crackdowns also continued in the name of stabilising the exchange rate, targeting gold and currency traders, palm oil importers, rice merchants and retailers,  property buyers and developers, and banks.  Punitive measures included arrests and detentions, including a Japanese executive of a supermarket joint-venture, and prominent business tycoon Serge Pun who has business links to Singapore and Hong Kong. The SAC’s coercive approach has backfired as market players will either stop or hide their activities, leading to heightened scarcity and demand and soaring prices.

Earlier, the Ministry of Transport and Communications, under Mya Tun Oo, mandated that telecommunications operators and fibreoptic internet providers introduce restrictions to their services and prevent access by users to virtual private networks, Facebook, Instagram, X, and WhatsApp by end-May. The SAC had also completely cut access to phone and internet services in certain conflict-affected areas. The additional restrictions have created substantial challenges for many businesses and organisations in Myanmar that rely on social media and chat apps for daily activities and communications with staff, partners, and stakeholders outside Myanmar.

The SAC has turned to Myanmar’s neighbours to alleviate the economic crisis at home. In May, the Ministry of Commerce introduced a process for cross-border barter trade transactions. The antiquated nature and ambiguous parameters of that process meant it was dead on arrival. A rupee-kyat settlement mechanism agreed between New Delhi and Naypyitaw in January was first put to use in July to complete the sale of a shipment of Myanmar pulses worth about US$120,000 to India. Similar mechanisms have been established with Thailand and China as the SAC seeks to de-dollarise its cross-border trade. It remains to be seen whether much of the future flows will move away from the dominant greenback, as these transactions apparently use the undervalued official exchange rate.

The SAC is also revisiting large infrastructure projects like the Dawei deep-sea port and the Myitsone Dam. Given the conflicts raging at or near the locations of these projects, it is unlikely that much, if any, progress will be made in the years ahead. The controversial nature of the Myitsone Dam, which past administrations had suspended (and kept suspended) in the previous decade, also brings into question the extent to which China may seek to protect its strategic and economic interests in Myanmar. China is not alone in its concern that the current quagmire in Myanmar would increasingly threaten its economic interests. Battles continue to rage across Myanmar, and the impacts of the intensifying conflict are increasingly spilling over borders, negatively impacting the economies and people of several of Myanmar’s neighbours. The sense of gloom and doom also continues for Myanmar’s economy as the coup wears on.

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