While the dearer exchange rate will likely have an impact on imports and inflation as petrol, raw materials and consumer goods become more expensive, exporters should stand to gain. Yet, businesses involved in exporting say this isn’t the case.

One reason is businesses must import require materials to add value to the finished product, so the higher value of the dollar eats into production costs anyway, said U Hnin Oo, vice chair of the Myanmar Shrimp Association.

“Even though exports are technically cheaper now, the prices of other imported goods needed in the supply chain are up. On the whole, dollar appreciation has not been beneficial to many exporters,” he said.

Take the rice industry for example. “Trader who are dependent on trade financing from the banks are expected to repay those loans at the current exchange rate. As the kyat has depreciated, many of these traders ended up with forex losses after being forced to fork out the difference from their own pockets,” said U Aung Myint, executive director at the Myanmar Agribusiness Public Corporation.

Other traders, while gaining from higher demand for cheaper goods sold, are nevertheless forced to buy materials which have become more expensive. The market price for things like fertilisers are now higher, which offsets the gain main from additional exports, said U Aung Myint. 

“We get more kyats as the dollar is rising but in the business world, you cannot conclude that there will be advantages. The reason for that is inflation as the kyat’s value decreases. As a result, we have to increase the price of the products we sell. Meanwhile, the prices of products we have to buy would have risen too. And as the resulting trade deficit balloons, the dollar value will keep rising and our fears will keep increasing,” said U Hnin Oo.

According to statistics from the Ministry of Commerce (MOC), total imports during this fiscal year up to the first week of July hit $ 5.3 billion, including $2.2 billion of raw materials and $1.2 billion of consumer goods.

Apart from natural resources like oil and gas, Myanmar’s main exports include agricultural products such as rice and beans as well as fish and other fishery products. During the same period, some $4 billion worth of goods were exported during the same period. This included more than $2 billion worth of finished industrial products and some $700 million worth of agricultural products were exported. Only around $150 million worth of aquatic products were exported.

As a result, the trade deficit for the current fiscal period up to the first week of July  was more than $1 billion.

According to theAsian Development Bank, inflation in Myanmar is forecast at around 6.2pc  in 2018, which is among the highest in ASEAN.

Source: https://www.mmtimes.com/news/falling-kyat-value-hurting-trade-widens-deficit.html