Myanmar junta bans businesses, residents from repaying foreign loans

The Central Bank of Myanmar on order of the country’s military government has issued a directive that companies and individual borrowers holding foreign loans are obliged to suspend repayments, the latest frantic move in a series of steps to defend the nation’s dwindling foreign exchange reserves and to prevent a collapse of the local currency, the kyat.

In a letter to banks licensed to deal in foreign exchange, the central bank’s deputy governor Win Thaw directed borrowers to suspend the repayment of interest and principal of various foreign loans obtained either in cash or in kind, according to Bloomberg News.

The directive requires licensed banks to inform their business customers with foreign debt to adjust loan repayment schedules with overseas lenders.

At least $1.2 billion in outstanding foreign loans

The debt encompasses at least $1.2 billion in outstanding dollar-denominated corporate loans, the report said. Borrowers include Ooredoo Myanmar, the domestic branch of Qatar’s telecom company Ooredoo, City Square Commercial, a real estate firm which is part of Shwe Taung Group, a Myanmar conglomerate run by tycoon Aik Htun, and telecom tower companies Apollo Towers Myanmar and Irrawaddy Green Towers, among others.

The repayment ban follows other measures to tighten foreign exchange rules after the nation’s currency lost a third of its value against the US dollar last year after the coup on February 1 triggered a freeze on parts of the foreign reserves held in the US and suspension of multilateral aid — both key sources of foreign currency supply for Myanmar.

Compulsory foreign cash exchange

Another rule has been introduced earlier that foreign exchange earners – both businesses and individuals – are mandated to convert their income into kyat at the central bank’s reference rate of 1,850 to a dollar set in April, a move designed to shield the local currency from volatility. The government has also banned imports of cars and luxury items, as well as tightened fuel and cooking oil imports to preserve its reserves.

The currency conversion rule has sparked much criticism, and the government initially granted exemptions for registered companies with a minimum ten-per cent foreign ownership which was later revoked.

“Shot in the foot”

Observers see all this measures – which by some have been characterized as erratic – as minimally effective to stabilise the collapsing economy as long as the core problem that Myanmar has from the international standpoint, the murderous junta regime, is still at the helms and with it the international sanctions remain.

“Foreign loan repayment bans and compulsory exchange of foreign money earned in Myanmar are further deteriorating the image Myanmar’s for foreign staff and investors,” one Myanmar-affiliated journalist told Investvine under conditions of anonymity.

“Does no one in the junta realise that such measures – antagonising skilled workers on foreign paychecks and destroying the country’s international creditworthiness – are a massive shot in the foot? Not smart, really.”



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The Central Bank of Myanmar on order of the country’s military government has issued a directive that companies and individual borrowers holding foreign loans are obliged to suspend repayments, the latest frantic move in a series of steps to defend the nation’s dwindling foreign exchange reserves and to prevent a collapse of the local currency, the kyat. In a letter to banks licensed to deal in foreign exchange, the central bank’s deputy governor Win Thaw directed borrowers to suspend the repayment of interest and principal of various foreign loans obtained either in cash or in kind, according to Bloomberg News....

The Central Bank of Myanmar on order of the country’s military government has issued a directive that companies and individual borrowers holding foreign loans are obliged to suspend repayments, the latest frantic move in a series of steps to defend the nation’s dwindling foreign exchange reserves and to prevent a collapse of the local currency, the kyat.

In a letter to banks licensed to deal in foreign exchange, the central bank’s deputy governor Win Thaw directed borrowers to suspend the repayment of interest and principal of various foreign loans obtained either in cash or in kind, according to Bloomberg News.

The directive requires licensed banks to inform their business customers with foreign debt to adjust loan repayment schedules with overseas lenders.

At least $1.2 billion in outstanding foreign loans

The debt encompasses at least $1.2 billion in outstanding dollar-denominated corporate loans, the report said. Borrowers include Ooredoo Myanmar, the domestic branch of Qatar’s telecom company Ooredoo, City Square Commercial, a real estate firm which is part of Shwe Taung Group, a Myanmar conglomerate run by tycoon Aik Htun, and telecom tower companies Apollo Towers Myanmar and Irrawaddy Green Towers, among others.

The repayment ban follows other measures to tighten foreign exchange rules after the nation’s currency lost a third of its value against the US dollar last year after the coup on February 1 triggered a freeze on parts of the foreign reserves held in the US and suspension of multilateral aid — both key sources of foreign currency supply for Myanmar.

Compulsory foreign cash exchange

Another rule has been introduced earlier that foreign exchange earners – both businesses and individuals – are mandated to convert their income into kyat at the central bank’s reference rate of 1,850 to a dollar set in April, a move designed to shield the local currency from volatility. The government has also banned imports of cars and luxury items, as well as tightened fuel and cooking oil imports to preserve its reserves.

The currency conversion rule has sparked much criticism, and the government initially granted exemptions for registered companies with a minimum ten-per cent foreign ownership which was later revoked.

“Shot in the foot”

Observers see all this measures – which by some have been characterized as erratic – as minimally effective to stabilise the collapsing economy as long as the core problem that Myanmar has from the international standpoint, the murderous junta regime, is still at the helms and with it the international sanctions remain.

“Foreign loan repayment bans and compulsory exchange of foreign money earned in Myanmar are further deteriorating the image Myanmar’s for foreign staff and investors,” one Myanmar-affiliated journalist told Investvine under conditions of anonymity.

“Does no one in the junta realise that such measures – antagonising skilled workers on foreign paychecks and destroying the country’s international creditworthiness – are a massive shot in the foot? Not smart, really.”



Support ASEAN news

Investvine has been a consistent voice in ASEAN news for more than a decade. From breaking news to exclusive interviews with key ASEAN leaders, we have brought you factual and engaging reports – the stories that matter, free of charge.

Like many news organisations, we are striving to survive in an age of reduced advertising and biased journalism. Our mission is to rise above today’s challenges and chart tomorrow’s world with clear, dependable reporting.

Support us now with a donation of your choosing. Your contribution will help us shine a light on important ASEAN stories, reach more people and lift the manifold voices of this dynamic, influential region.

 

 

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