Myanmar targets independent monetary policy in the first half of next rear

Bangkok: Myanmar’s central bank plans to implement an independent monetary policy in the first half of next year to keep prices and banks stable as investors prepare to inject money into the former military regime.

Parliament will consider a law as early as next month that will expand the Central Bank of Myanmar’s authority and independence, Deputy Governor Maung Maung Win said in an interview on September 14. The International Monetary Fund and Bank of Thailand will also soon complete training programs for Myanmar officials, he said.

“We are late so we have to do hard work,” Maung Maung Win said in the bank’s Yangon office. “When our training programmes finish, we can target our inflation, we can target our foreign- exchange market.”

Myanmar officials are preparing to take control of a financial system largely run on informal cash transactions as companies such as Western Union Co. and Coca-Cola Co. announce plans to operate in the country. Foreign-exchange transactions have started to shift from informal markets to banks after a managed float of the currency in April and the easing of restrictions on importers and exporters last month, Maung Maung Win said.

“I do worry about that,” Maung Maung Win said, referring to the impact of an expected surge of capital into Myanmar. “At that time, if the inflows are much, our currency will appreciate much. We have to do our best and negotiate with other ministries, other institutions to overcome that challenge.”

The kyat has weakened 5.2 per cent since the April float to 860 per dollar on Septem 14, the worst performer among Southeast Asian countries in that period, according to data compiled by Bloomberg. The central bank and government need to work together to keep the currency stable, and one way is by saving natural- resource proceeds to provide a reserve cushion, Meral Karasulu, an IMF official advising Myanmar, told an investment seminar in the capital Naypyidaw last week.

Neighboring India is also pursuing economic reforms by opening up retail and aviation industries. Prime Minister Manmohan Singh is embarking on the biggest gamble of his second term, pushing through policy changes opposed by members of his own coalition as he seeks to revive the economy.

Myanmar’s opening is boosting its growth prospects even as the weakening global economy damps expansion across Asia. Singapore’s exports fell more than economists estimated in August as shipments of electronics dropped and companies sold fewer goods to Europe, a report showed on Mondayday.

India will probably refrain from lowering interest rates today, with the central bank predicted to keep the repurchase rate at 8 per cent, according to a Bloomberg News survey. The European Union’s statistics office may say labour costs rose at a slower pace last quarter from a year earlier, while the euro zone’s trade surplus probably narrowed in July, surveys showed.

President Thein Sein has shifted Myanmar toward democracy since he took office last year to end about five decades of direct military rule. He is seeking to create jobs ahead of an election in 2015 that will include former political prisoner Aung San Suu Kyi’s National League for Democracy party.

Government policies such as a move last year to import more cars also play a role in managing the currency, Maung Maung Win said. While exporters are pushing for a dollar to fetch between 900 and 1,000 kyat to keep their goods competitive, the central bank will also take into consideration the views of importers and the rural population, he said.

Myanmar’s economy may grow as much as 8 percent annually if policy makers keep prices under control, increase trade and attract investment, the Asian Development Bank said last month. About a quarter of the country’s 64 million people have access to electricity, while mobile-phone and Internet usage is among the lowest in Southeast Asia, the ADB said.

The central bank is a department under the Finance Ministry, and its main function is printing money to fund fiscal deficits. While bond sales financed about 46 percent of the budget deficit in the fiscal year that ended in April, the rest was monetised, according to the IMF.

The government will allow foreign banks to enter joint ventures with local lenders next year, Maung Maung Win said, followed eventually by incorporated subsidiaries and full branches. The ownership percentage will depend on the new foreign investment bill that has been passed by parliament and is awaiting the president’s approval, he said.

Myanmar has made it easier for its citizens to move money this year, introducing debit cards to pay for local goods and authorizing several private banks to accept remittances from migrant workers in Thailand, Malaysia and Singapore. Foreign companies can transfer funds to Myanmar through four state-run banks, and that privilege may soon be extended to private lenders, Maung Maung Win said.

“We try our best with the systems of international organisations and neighbouring countries,” he said. “Myanmar will grow because of the new government’s opening-up policy.”