Myanmar’s Foreign Exchange Shortages Have Eased, But Challenges Remain

For much of its post-coup rule since 2021, the State Security and Peace Commission (SSPC) military regime in Myanmar, formerly known as the State Administration Council (SAC), has faced foreign currency shortages. This has shaped the regime’s policy and constrained its actions both on and off the battlefield. However, over the last year or so, these constraints seem to have eased. So too has the depreciation of the Myanmar kyat in the informal hundi market – an indicator of reduced scarcity. This trend has many drivers, including SAC/SSPC efforts to control market forces and actors, shaping both supply and demand of foreign currency. The implications of this change are significant for the SSPC regime, as well as the ongoing conflict in Myanmar and the economy.

Since the 2021 coup, the SAC/SSPC has faced significant forex shortages. This was partly driven by economic changes, including lower forex inflows from aid and FDI (though actual in-cash FDI inflows have fallen far less than the widely-reported approved FDI figures). Exports declined in 2021 but rebounded to record highs in 2022, before falling again more recently. Sanctions also disrupted forex access and contributed to shortages, at least for some time. Forex shortages were also driven by changes in the behaviour of the Myanmar people, many of whom remember the 2003 banking crisis, kyat demonetizations, high inflation, and currency depreciation under the previous military regime. They lack faith in the financial system and the kyat under military rule, so have moved money out of kyat and into forex, gold, property, and other stores of value.

The SAC/SSPC took steps to both conserve and tap new sources of forex. Steps to conserve forex included: strict trade licensing and the “export first” policy; capital controls on many outward remittances; reduced spending on forex-heavy areas like power supply; and reduced provision of forex at lower official exchange rates (2,100 MMK/USD) for importing fuel and basic goods (even the regime’s mouthpiece, the Global New Light of Myanmar, no longer talks about forex resales at the official rate, even though it regularly talks about resale of forex). The SAC/SSPC also took steps to access forex from new sources, most saliently by compelling migrant workers to remit 25 per cent of their income through official channels and requiring exporters to convert forex earnings to kyat.

In 2025, however, the regime’s forex challenges eased, due to both increased inflows and decreased demand. Migrant worker remittances increased by 46 per cent in FY 2024/25, to US$2.1 billion. This was driven by heightened pressure on migrant worker agencies to ensure migrants remit money, as well as a narrower gap between official and hundi rates, which reduced incentives to use the hundi system. Aid and humanitarian assistance in the wake of Myanmar’s 2025 earthquake further increased inflows. The regime also showed its willingness to strictly enforce forex repatriation requirements, including by revoking registrations of nearly 200 exporters that did not repatriate earnings.

At the same time, the SSPC has depressed demand for forex by reducing imports through trade licensing, the “export first policy”, border closures, and new border trade licensing requirements. The regime banned certain types of imports or restricted inflows to parts of the country. Demand is also limited by a weak domestic economy.

The SSPC’s improved forex situation has widespread implications for the regime and the country. The effects on Myanmar’s conflict are perhaps the most important. With fewer forex constraints, the SSPC can increase procurement of fuel and military equipment, including munitions and drones. Notably, the regime’s drone attacks and airstrikes hit an all-time high in 2025.

Perhaps the biggest unknown is whether the regime’s improved forex situation is sustainable.

There are also implications for the country’s economy. Trade restrictions reduce imports, which in turn reduces investment and hurts consumers. Because restrictions include essential items like pharmaceuticals, the regime’s improved forex situation comes at a direct cost for human health and well-being. The regime’s steps to improve its forex situation also affect exchange rates, including hundi rates, which could reduce the amount of kyat that remittance recipients get.

Yet the economic implications are not all negative. The improved forex situation is linked to the CBM’s January 2026 decision to reduce the share of forex compulsorily converted to kyat at the official rate to 15 per cent of export proceeds, down from 25 per cent. This helps exporters and, by extension, people in export-oriented sectors like agriculture. The CBM also made forex available for LNG purchases, which resulted in the return of Hong Kong-based power provider VPower in November 2025. VPower’s resumption of two stalled power projects would raise electricity supply. Finally, the changed forex situation has improved exchange rate stability, providing predictability for some businesses. Notably, Myanmar’s hundi rate did not experience a crisis in the third quarter of 2025 – the first year post-coup this has not happened.

Perhaps the biggest unknown is whether the regime’s improved forex situation is sustainable. Rumours of foreign powers or illicit funds affecting the forex situation have swirled, though these are highly speculative. There are also concerns that an appreciating currency, combined with high and sustained inflation, presents challenges for export-oriented sectors. With flat kyat-denominated earnings, people working in these sectors will increasingly struggle to survive amid rising prices. Despite these long-term questions, the SAC/SSPC and whatever post-election regime succeeds it will largely benefit from the improved forex situation, at least for some time.

2026/55