Myanmar’s Overvalued Exchange Rates Are a Recipe for Economic Deterioration

The latest iteration of Myanmar’s military government took power in April 2026 and shortly thereafter, laid out its 100-day plan. The plan makes little mention of an economic agenda, besides vague references to improving agriculture, increasing rural lending and some infrastructure investments. However, the regime seems poised to retain economic policies adopted by the former State Administration Council (SAC), including the system of multiple overvalued exchange rates. Overvaluation has numerous negative effects. It reduces export earnings, shrinks export volumes, makes imports scarce, incentivises informality and affects import prices — making some cheaper and others more expensive. If Myanmar’s military government continues this approach or doubles down in response to the global energy crisis, it will reduce the prospects for an economic rebound and exacerbate the country’s long-run economic challenges, while undermining the regime’s own economic agenda.

Since 2022, the Central Bank of Myanmar has tightly controlled exchange rates. In April 2022, it set the official rate to 1,850 Myanmar kyat (MMK) per US dollar (USD) and in August 2022 adjusted it to 2,100 MMK/USD — where it has remained since. It created other rates, including an online platform rate, which stood at 3,658 MMK/USD at end-May 2026. By contrast, Myanmar’s unofficial rate was 4,245 MMK/USD. This makes the two key official rates overvalued by 16 and 102 per cent, respectively. To force individuals and businesses to use official rates, the regime employs a series of trade licences and other controls.

Overvaluation directly harms Myanmar’s exporters. When exporters bring US dollars (or other foreign currencies) back to Myanmar, they are forced to change them to Myanmar kyat at either the official or platform rate. Most exporters must convert 15 per cent at the official rate and 85 per cent at the platform rate, so they receive 3,423 MMK for every USD they bring back. Some businesses, such as garment manufacturers, can change all their incoming payments at the platform rate, so they receive a bit more: 3,658 MMK/USD. However, both are less than the 4,245 MMK/USD they would receive if they changed money at the unofficial rate. The result: exporters get less local currency from their exports.  

This outcome has many negative consequences. It reduces the kyat available to pay wages to workers and to buy crops from farmers. This lowers incomes and makes jobs in other countries relatively more appealing, and so contributes to outmigration. It discourages workers from investing in skills and businesses from investing in physical capital, as the financial returns are lower. Some businesses become uncompetitive on global markets, so they stop exporting altogether. Finally, it encourages businesses to rent-seek — investing in their relationship with the regime to improve their hopes of getting foreign exchange (forex).

If Myanmar’s military government continues this approach or doubles down in response to the global energy crisis, it will reduce the prospects for an economic rebound and exacerbate the country’s long-run economic challenges.

Agriculture is especially affected by overvaluation. Why? It is a major export sector. It accounts for more than a third of the country’s total employment, and is a vital income source for Myanmar people — especially in rural areas. Lower earnings for farmers translate directly to lower incomes and less investment, for example, by reducing fertiliser use or by restraining long-term investment in value chains and infrastructure. Alongside conscription, this drives outmigration, making agricultural labour scarcer and increasing daily wages.

The overvalued kyat should theoretically make imports less expensive in local currency terms. But with less forex available for imports, and higher demand for them, it leads to shortages. This is happening in Myanmar, as many imported goods available in the past are no longer so. For other imports, it creates a flourishing black market with scarce goods resold at a premium. Cheaper but scarce imports benefit those that can access them, often wealthy or connected individuals. Such imports also benefit well-connected importers, who sometimes buy imports with cheap forex and sell them at market prices. The benefits for low and lower-middle income households are limited, in part because they spend most of their money on food, almost all of which is local.

The overvalued kyat also undermines some import substitutes by making competitors artificially cheap. This affects sectors like palm oil, where Myanmar’s domestic producers compete with cheap imports. The sector’s only saving grace is that the military’s policies are so untenable that no one obeys them. The majority of consumers have to buy palm oil at market prices, which are three times the regime’s reference rate.

Finally, overvaluation incentivises informality. Exporters who can get goods out of Myanmar or money into the country informally have an inherent advantage over formal competitors — they get about 25 per cent more kyat from exports. This incentivises practices such as under-invoicing and the use of shell companies. To limit this, the SAC/State Security and Peace Commission (SSPC) enacted widespread controls to limit informal exports and money movement tools. Despite attempts at enforcement, the incentives to work informally remain.

The long-run effects of these policies are detrimental: they reduce wages and employment, undermine investment and over time, worsen the forex situation. They make Myanmar’s exporters less competitive, undermining the industrial base and hindering development, and deter export-oriented foreign investors.  

These consequences have been understood for decades, with research showing how overvaluation pushes economic activity away from forex-earning activities and hinders exporter development. Despite this, Myanmar’s military regime seems wedded to the approach. If the fuel crisis worsens Myanmar’s economic situation, there is a risk the ‘new’ government doubles down, worsening the situation. This will only hurt Myanmar’s people and exacerbate regional challenges like migration. Over time, this will further undermine Myanmar’s economic base and diminish its prospects for economic recovery.

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