The new law is the latest in a series of economic and political reforms made by the quasi-civilian government led by U Thein Sein, aimed at opening up Myanmar’s economy to the international community who has taken keener interest in the country which isolated itself for about five decades.
The rules and regulations of the law had not been revealed at the time of writing this article, but the most notable point of the law is that the central bank will be given greater autonomy so that it can operate more like international central banks.
“The rules and regulations have already been drawn up. So we can expect them to emerge very soon,” Win Hteik, a senior central bank official, told Reuters. He said the governor and three deputy-governors would in future be nominated by the president and approved by parliament.
Tina Singhsacha, chief representative, Myanmar, Standard Chartered Bank, said the central bank stands as a key institution to steer the economy’s development in a stable manner.
“As a developing economy transits from a closed agricultural economy to a more industrialised and open country, a common negative byproduct is macroeconomic volatility,” Tina told Myanmar Business Today.
“Operational autonomy with proper accountability will help the central bank to become a stabilising force in the economy. A central bank’s functions, while largely focused on financial markets, is multi-faceted. The development of the Myanmar Central Bank will not just be crucial for the growth of the financial sector, but of the whole economy,” Tina added.
Currently, foreign banks are only allowed to open representative offices and more than 30 international banks including Standard Chartered, ANZ, Kasikorn Bank and CIMB have done so in order to make early moves into a market that is expected to offer high returns in the future.
Win Hteik told Reuters that the new law could include details of how joint-venture banks could be set up with foreign lenders.
The Central Bank of Myanmar was established as the Union Bank of Burma in 1947 and took over the functions of the Yangon branches of the Reserve Bank of India. It was established with an authorised capital of K40 million and paid up capital of K10 million by the government.
On its website, the Central Bank said its aim is “to preserve the internal and external value of the Myanmar Currency, the kyat.”
Helped by the International Monetary Fund, the central bank introduced a managed float of the kyat in April 2012 as part of the unification of the exchange rate system.
It first floated at 818 per dollar, a level in line with the black market at the time but which the IMF and economists said was overvalued. Since then, the kyat has fallen sharply and the central bank’s daily reference rate was set at 980 on Friday last week.
State-owned MRTV television reported the enactment by the president late on Thursday last week and said details would be published in newspapers next day. But there was nothing in any of last Friday’s papers, including the New Light of Myanmar, a state daily that carries official announcements.
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