The Bank of Myanmar has ordered companies and small borrowers to suspend repayment of foreign debt. This will lead to a decline in the credibility of Myanmar companies.
On July 13, the Central Bank of Myanmar issued an announcement allowing companies and small borrowers to suspend payments on foreign debt, both principal and interest. Previously, Myanmar authorities had banned the import of cars and other luxury items. In addition, all companies were ordered to exchange their existing foreign currencies into kyats within 24 hours.
All orders were made due to the need to stem foreign currency outflows in hopes of slowing the depreciation of the kyat and preventing existing international reserves from declining.
Since the coup last February, Myanmar’s economy and finances have been hit hard by international sanctions, particularly by the United States, which froze Myanmar’s reserves deposited in the United States in response to the coup.
In addition, the conflict resulting from the coup d’état affected foreign investment and tourism until a civil war broke out, eliminating this part of foreign exchange earnings and creating a current account deficit.
Myanmar still has accumulated external debt of about 16% of GDP (about $11 billion). The last recorded reserves in February were about $7,705 million, which is just 0.7 times the outstanding external debt.
Considering that the current kyat has weakened by more than 33% against the dollar compared to last year, including the deficit, it can be assumed that Myanmar’s current reserves are below the last record level.