Real exchange rate appreciation, resource boom, and policy reform inMyanmar

Abstract

Over the six‐year period 2006‐11, the real exchange rate of theMyanmar kyat appreciated 200 per cent, resulting in the value of theUSdollar inMyanmar falling to one‐third of its pre‐2006 level. While the resource boom is suspected to be the source of the real exchange rate appreciation, administrative controls on foreign exchange and imports had much more impact. Foreign exchange controls limited the convertibility of the kyat to foreign currencies and spurred negotiated transactions of foreign exchange outside the banking sector, hampering the foreign exchange market interventions of the government andCentralBank. Import controls repressed imports, aggravating excess supplies of foreign exchange. Relaxation of administrative controls is necessary for moderating currency appreciation.