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Myanmar faces falling currency, dollar crunch as economy worsens – Aljazeera.com

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3 years ago

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Myanmar is battling a plunging local currency amid an unprecedented dollar shortage, driving up the cost of imports and worsening the economy’s struggle with dual challenges of the pandemic and post-coup financial isolation.

The kyat has tumbled about 50% since the military seized power in February that triggered a freeze on parts of Myanmar’s foreign reserves held in the U.S. and suspension of multilateral aids — both key sources of foreign currency supplies. Restrictions on cash withdrawals have fueled worries about the safety of money in banks, prompting people to seek more widely used currencies such as the U.S or Singaporean dollars or Thai baht, analysts said.

The Central Bank of Myanmar’s efforts to quell the rush for dollars, including stepping up foreign currency supplies and ordering exporters to repatriate earnings within 30 days, have failed to stem the kyat’s slide. The currency may plunge further to 2,400 to a U.S. dollar by the end of this year and 3,200 by end-2022, according to Jason Yek, senior Asia country risk analyst at Fitch Solutions.

The currency sell-off is the latest crisis to hit the country that’s still grappling with street protests following the ouster of the civilian government led by Aung San Suu Kyi. Nationwide Covid restrictions and a civil disobedience movement by Suu Kyi’s followers have hit normal economic activities, shrinking exports of everything from textiles to agricultural commodities, another source of foreign exchange.

“It is really hard to predict when this financial crisis will end,” said Khine Win, a public policy analyst focusing on economic governance in Myanmar. “Only the restoration of democracy and a legitimate government will unlock the international assistance Myanmar needs to address this crisis, but it’s really hard to see that happening.”

The plunging currency is already taking its toll on Myanmar’s economy, with some businesses shutting down as they are unable to cope with rising costs of imports and raw materials. The economy is estimated to have contracted 18.7% in the fiscal year ended on Sept. 30, according to the ASEAN+3 Macroeconomic Research Office. While the official exchange rate for a dollar was at 1,965 kyat last week, local money managers were quoting 2,200-2,300 kyat, Fitch Solutions’ Yek said.

Though the central bank doesn’t divulge its foreign reserve levels, the recent slide in kyat suggests that “it has likely fallen to a precariously low level” after trying to prop up the currency for months, Yek said.

The currency volatility is expected to ease soon due to recent steps taken by the authorities and higher export earnings seen in November and December, Win Thaw, a deputy governor at the Central Bank of Myanmar, said Monday.

Myanmar’s reserves dwindled after the U.S. froze $1 billion held in the New York Federal Reserve days after the coup, while the World Bank and the International Monetary Fund suspended funding for projects. To preserve the foreign currencies onshore, authorities last month suspended imports of passenger cars and amended the forex law last week.

But putting more controls will further undermine investor confidence in Myanmar and exporters will find ways to keep hard currency offshore, said Vicky Bowman, director of Myanmar Center for Responsible Business.

“The fundamental cause for forex crunch is the collapse in investor confidence in Myanmar and the suspension of development assistance since February,” Bowman said. “Without a political solution which leads to the resumption of lending and restores confidence in the country, it will be difficult for the kyat to recover.”

Foreign direct investment into Myanmar had dwindled with multinational companies becoming increasingly wary of doing business with the military regime and some heading for the exit. Reversing that trend will be key to reversing the kyat’s fortunes.

“We don’t see any FDI coming in and the trend for kyat depreciation may prolong as long as the military remains in power,” Khine Win said. “This could drag more middle class people below the poverty line.”

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Economy

Minimum wage to hire higher-paid temporary foreign workers set to increase

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October 21, 2024

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OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.

Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.

The change is scheduled to come into force on Nov. 8.

As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.

The program has also come under fire for allegations of mistreatment of workers.

A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.

In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.

The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.

According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.

The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.

Temporary foreign workers in the agriculture sector are not affected by past rule changes.

This report by The Canadian Press was first published Oct. 21, 2024.

— With files from Nojoud Al Mallees

The Canadian Press. All rights reserved.

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PBO projects deficit exceeded Liberals’ $40B pledge, economy to rebound in 2025

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5 days ago

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October 17, 2024

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OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.

However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.

The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.

Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.

The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.

The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.

This report by The Canadian Press was first published Oct. 17, 2024.

The Canadian Press. All rights reserved.

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Statistics Canada says levels of food insecurity rose in 2022

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6 days ago

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October 16, 2024

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OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.

In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.

The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.

Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.

In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.

It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.

This report by The Canadian Press was first published Oct 16, 2024.

The Canadian Press. All rights reserved.

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