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Myanmar Is Running Out of Cash

Categories : Cash and Crises, Cash is a contingency and fall-back solution, Cash is a public good
June 8, 2021
Tags : Cash and Crises, Central Bank, Myanmar, Run on cash
Myanmar (Burma) is facing a severe cash shortage as the central bank is not providing sufficient cash to meet demand. Queues are growing at ATMs and bank branches, raising fears of a banking crisis.
Guillaume Lepecq

Chair, CashEssentials

From military coup to cash crisis

Following the military coup on February 1, thousands of protestors erupted across Myanmar (Burma). Protestors were violently confronted by security forces bringing the economy to a standstill. Hundreds have been killed and thousands detained. Four months later, the country is facing a severe cash crisis triggered by several factors.

According to bankers and analysts, the central bank, now run by a junta appointee, has not returned some of the reserves it holds for private banks without giving any reason, leaving the banks short of cash.

A physical shortage of banknotes could also explain the shortage. The Financial Times has reported that Giesecke & Devrient, the company that supplied raw materials and components to Myanmar’s state-owned banknote security printer, suspended them in late March. The company said the halt was in reaction to “the ongoing violent clashes between the military and the civilian population.”

Staff shortages and the closing of bank branches are the third issues. Many bank staff and civil servants, including central bank employees, have gone on strike to protest against the coup, leaving many banks closed or open only intermittently.

Queues at ATMs and a Busy Black Market

As a result of the shortage, queues are forming in front of ATMs and bank branches. The Bangkok Post reports that queues start forming outside banks at 4 am, where the first 15 or 30 customers are given a plastic token that will allow them to enter the bank when it opens at 9:30 and withdraw cash. Banks have also imposed limits on ATM and over-the-counter withdrawals.

Black-market traders will take online transfers in exchange for physical notes in various currencies but add a hefty commission of up to 10%.

Meanwhile, internet outages make online transactions difficult, and international transfers have largely stopped working.

Millions are expected to go hungry

The UN Development Programme warned that under the combined effects of the pandemic and the coup, Myanmar faces economic collapse, which in its worst-case analysis could push nearly half the country’s 54 million people into poverty, compared to about a quarter in 2017.

“If the situation on the ground persists, the poverty rate could double by the beginning of 2022,” said UNDP in its report. “By then, the shock from the crisis will have resulted in significant losses of wages and income, particularly from small businesses, and a drop in access to food, basic services and social protection.”

 

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