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Myanmar political standoff leaves economy in tatters – CTV News

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The military takeover in Myanmar has set its economy back years, if not decades, as political unrest and violence disrupt banking, trade and livelihoods and millions slide deeper into poverty.

The Southeast Asian country was already in recession when the pandemic took hold in 2020, paralyzing its lucrative tourism sector. Political upheavals after the army ousted its civilian government on Feb. 1 have heaped further misery on its 62 million people, who are paying sharply higher prices for food and other necessities as the value of the kyat, the national currency, plummets.

With no end to the political impasse in sight, the outlook for the economy is murky.

U.N. humanitarian chief Martin Griffiths appealed last week to Myanmar’s military leaders to allow unimpeded access to more than 3 million people needing “life-saving” aid “because of growing conflict and insecurity, COVID-19 and a failing economy.”

Griffiths said he was increasingly concerned about reports of rising levels of food insecurity in and around the cities.

Hundreds of thousands of people in the country have lost their jobs and poverty has deepened as Myanmar’s inflation has skyrocketed.

“Imported foods and medicines cost double what they used to . . . so people buy only what they need to buy. And when traders sell an item for 1,000 kyats one day and 1,200 the next, it means that the seller is losing while selling,” said Ma San San, a trader in Mawlamyine township who sells Thai goods.

Myanmar’s economy is forecast to shrink by 18.4% in 2021, according to the Asian Development Bank, one of the deepest recent contractions anywhere.

The civilian government ousted in February had been making slow but steady progress toward weaving impoverished Myanmar into the global economy after decades of quasi-isolation under past military regimes. Exports surged over the last decade, after the generals relaxed their decades-long hold on power. Eager to tap a young and low-cost workforce, foreign investors set up factories making garments and other light manufactured goods.

Yangon, the former capital and largest city, was transformed as moldering buildings dating back to British colonial days were spruced up or demolished, making way for new roads, industrial zones, shopping malls and modern apartments. Private businesses popped up, creating jobs and meeting long-deprived demand for products like cellphones and new cars.

But the military still controlled key government ministries and many industries, and corruption and cronyism thrived. Months into Myanmar’s political crisis, the country has returned to the days of black market trading and dollar hoarding.

“Now most people are losing faith in the Myanmar currency and buying dollars, so prices are soaring,” said Soe Tun, chairman of the Myanmar Automobile Manufacturers and Distributors Association and an official of the Myanmar Rice Association.

Trade has been hindered both by the global shortage, and surging costs, of shipping containers and by China’s closure of its border to exports from Myanmar to help control coronavirus outbreaks.

Myanmar’s total trade fell 22% from a year earlier in the 10 months from October 2020 to July 2021, Senior Gen. Min Aung Hlaing, who led the army’s takeover, recently told his military-installed cabinet. He said the country logged a trade deficit of $368 million.

The less Myanmar exports, the less it earns in foreign currency — mainly dollars — making the greenback all the more scarce and valuable versus the kyat.

In January, the dollar bought 1,300-1,400 kyats. In late September, it hit a record high 3,000 kyats among money changers on downtown Yangon’s Shwebontha Street, informally known as Broker Street.

That has driven up prices in kyats for necessities such as cooking oil, cosmetics, food, electronics, fuel and other increasingly costly supplies that have to be imported using dollars.

The authorities suspended vehicle imports from Oct. 1 to conserve foreign exchange. To stanch the kyat’s plunge, the Central Bank of Myanmar has intervened in the market 36 times since February. But such operations have had scant impact, traders say, since most dollars sold by the central bank go to pro-military businesses.

“Some say the dollars issued by the central bank do not meet domestic demand, and we accept that is true,” Maj. Gen. Zaw Min Tun, the military administration’s chief spokesperson, told reporters.

“As a government, we have to take responsibility for what happened in our time rather than blaming the past,” he said. “I want to say that our government is working hard to find the best solution.”

Some people have set up money changing groups to swap kyats for dollars online despite the risks, and the central bank recently issued a notice banning such non-official dealings.

“Online is easier these days. You can easily find people who want to buy or sell. But you need to build trust between sellers and buyers. There are also scammers online,” said Ko Thurein, who often posts dollar sales in the Myanmar Money Changer Group.

Fuel scarcity has become a major problem. Partly thanks to rising global oil prices, the cost of gasoline, which is imported since Myanmar has scant refining capacity, has more than doubled to a record of about 1,500 kyats per liter from about 700 kyats in January.

Zaw Min Tun, the military’s spokesperson, said Myanmar was working on long-term hydropower and wind power projects while trying to conserve energy and cut imports since it could not “cover the demand for fuel.”

Top leader Min Aung Hlaing has exhorted the public to help reduce energy use.

“It’s difficult to buy dollars, and oil companies are no longer selling us on credit,” said an official from Max Energy, a major conglomerate operating dozens of filling stations. “You cannot buy everything you want and we have a hard time building trust with them. So we are just trying not to lose too much at the moment.”

He blamed the political crisis. “Even in our country, people do not trust each other, and there is no doubt that foreigners do not trust us. It is also because the banking system is in turmoil,” said the official, who spoke on condition of anonymity given the sensitivity of the topic.

“Gasoline prices have skyrocketed, so we have to raise fares. But passengers don’t want to pay. I know everyone is impoverished right now, so people are using buses instead of taxis,” said Moe Myint Tun, a taxi driver in Yangon. “When we have high fuel prices, we lose a lot of passengers.”

Like many other modern amenities, bank services have been periodically disrupted by protests and strikes, forcing people wanting to access their cash to use mobile banking apps and pay 5%-7% fees at so-called Pay Money shops providing financial services.

“Because of inflation, the money in our hands automatically decreases in value. Once the money in the bank can’t be withdrawn, we have to pay a commission at the Pay Money shops. Finally, we have nothing left,” said Su Yee Win Aung, a sales clerk at a telecommunications company in Yangon.

“It can be said that it is the most difficult time for us,” she said.

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Taliban Prime Minister Seeks Global Help to Shore Up Economy – Bloomberg

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Afghanistan’s Acting Prime Minister Mullah Mohammad Hassan said his interim administration has inherited a sinking economy and called on the global community to assist the country in preventing a further crisis as inflation spirals.

The former U.S.-backed government of Ashraf Ghani was corrupt and damaged the country’s economic situation, Hassan said in his first national address since assuming office. “The Islamic Emirate wants good relations with all countries and economic relations with them.” Only the audio portion of the speech was broadcast on television.

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Afghan Economy Nears Collapse as Pressure Builds to Ease U.S. Sanctions – The New York Times

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Afghanistan’s economy has crashed since the Taliban seized power, plunging the country into one of the world’s worst humanitarian crisis.

MAZAR-I-SHARIF, Afghanistan — Racing down the cratered highways at dawn, Mohammad Rasool knew his 9-year-old daughter was running out of time.

She had been battling pneumonia for two weeks and he had run out of cash to buy her medicine after the bank in his rural town closed. So he used his last few dollars on a taxi to Mazar-i-Sharif, a city in Afghanistan’s north, and joined an unruly mob of men clambering to get inside the last functioning bank for hundreds of miles.

Then at 3 p.m., a teller yelled at the crowd to go home: There was no cash left at the bank.

“I have the money in my account, it’s right there,” said Mr. Rasool, 56. “What will I do now?”

Three months into the Taliban’s rule, Afghanistan’s economy has all but collapsed, plunging the country into one of the world’s worst humanitarian crises. Millions of dollars of aid that once propped up the previous government has vanished, billions in state assets are frozen and economic sanctions have isolated the new government from the global banking system.

Now, Afghanistan faces a dire cash shortage that has crippled banks and businesses, sent food and fuel prices soaring, and triggered a devastating hunger crisis. Earlier this month, the World Health Organization warned that around 3.2 million children were likely to suffer from acute malnutrition in Afghanistan by the end of the year — one million of whom at risk of dying as temperatures drop.

No corner of Afghanistan has been left untouched.

In the capital, desperate families have hawked furniture on the side of the road in exchange for food. Across other major cities, public hospitals do not have the money to buy badly needed medical supplies or to pay doctors and nurses, some of who have left their posts. Rural clinics are overrun with feeble children, whose parents cannot afford food. Economic migrants have flocked to the Iranian and Pakistani borders.

Victor J. Blue for The New York Times
Victor J. Blue for The New York Times

As the country edges to the brink of collapse, the international community is scrambling to resolve a politically and legally fraught dilemma: How can it meet its humanitarian obligations without bolstering the new regime or putting money directly into the Taliban’s hands?

In recent weeks, the United States and the European Union have pledged to provide $1.29 billion more in aid to Afghanistan and to Afghan refugees in neighboring countries. But aid can do only so much to fend off a humanitarian catastrophe if the economy continues to crumble, economists and aid organizations warn.

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“No humanitarian crisis scan be managed by humanitarian support only,” said Abdallah Al Dardari, the United Nations Development Program’s resident representative in Afghanistan. “If we lose these systems in the next few months, it will not be easy to rebuild them to serve the essential needs of the country. We are witnessing a rapid deterioration to the point of no return.”

Under the previous government, foreign aid accounted for around 45 percent of the country’s G.D.P. and funded 75 percent of the government’s budget, including health and education services.

But after the Taliban seized power, the Biden administration froze the country’s $9.5 billion in foreign reserves and stopped sending the shipments of U.S. dollars upon which Afghanistan’s central bank relied.

The scale and speed of the collapse amounts to one of the largest economic shocks any country has experienced in recent history, economists say. Last month, the International Monetary Fund warned that the economy is set to contract up to 30 percent this year.

Kiana Hayeri for The New York Times
Jim Huylebroek for The New York Times

Thousands of government employees, including doctors and teachers, have gone months without pay. The wartime economy that employed millions and propped up the private sector has come sputtering to a halt.

By the middle of next year, as much as 97 percent of the Afghan population could sink below the poverty line, according to an analysis by the United Nations Development Program. Many people who were already living hand-to-mouth have been pushed over the edge.

One October morning in Mazar-i-Sharif, dozens of men gathered downtown, carrying shovels cobbled together with rough wood and rusted metal.

For years, day laborers have gathered there to pick up work digging wells, irrigating fields of cotton and grain, or doing construction around the city. The pay was modest — a couple dollars a day — but enough to buy food for their families and pay other small bills. These days, though, the men stay at the square until sunset hoping for even one day of work a week. Most cannot even afford to buy bread during lunch.

“There was work one day — and then suddenly there wasn’t,” said Rahmad, 46, standing in the crowd. “It was so sudden I didn’t have time to plan or save money or anything.”

Even before the Taliban takeover, Afghanistan’s fragile economy was wracked by slow growth, corruption, deep poverty and a severe drought.

Afghanistan has long been dependent on imports for basic foods, fuel and manufactured goods, a lifeline that was severed after neighboring countries closed their borders during the Taliban’s military campaign this summer. Trade disruptions have since caused shortages of crucial goods, like medicine, while the collapse of financial services has strangled traders who rely on U.S. dollars and bank loans for imports.

At the Hairatan port along the Afghanistan-Uzbekistan border, a team of workers unloaded flour bags from a shipping container into trucks, sending clouds of white specks into the air. Since August, their company has slashed its imports in half; people can no longer afford basic goods.

Kiana Hayeri for The New York Times
Kiana Hayeri for The New York Times

At the same time, the cost of doing business soared. Customs and traffic officers, who have gone unpaid for months, are asking for more in bribes, according to a manager for the company, the Bashir Navid Group.

“Everything is disorganized,” the manager, Mohammad Wazir Shirjan, 50, said. “Everyone is completely frustrated.”

To avoid a complete currency collapse, the Taliban limited bank withdrawals to first $200 and then $400 a week and have appealed to China, Pakistan, Qatar and Turkey to fill its budget hole, which is billions of dollars large. So far, none have offered the financial backstop that Western donors provided to the former government.

The Taliban have also pressed the United States to release its chokehold on the country’s finances or risk a famine, as well as Afghan migrants flooding into Europe in search of work.

“The humanitarian crisis we have now is the result of those frozen assets. Our people are suffering,” Ahmad Wali Haqmal, a spokesperson for the Ministry of Finance, said in an interview.

In late September, the Biden administration issued two sanctions exemptions for humanitarian organizations to ease the flow of aid, and it is considering additional adjustments, according to humanitarian officials involved in those negotiations. But those exemptions do not apply to paying employees like teachers in government-run schools and doctors in state hospitals, and the decision not to include them risks the collapse of public services and a further exodus of educated professionals from the country, humanitarians say.

Kiana Hayeri for The New York Times
Kiana Hayeri for The New York Times

And the scope of the exemptions is limited in other ways. Many foreign banks that aid organizations rely on to transfer funds into Afghanistan have cut ties to Afghan banks for fear of running afoul of sanctions. And the liquidity crisis severely restrains the amount that organizations can withdraw to pay vendors or aid workers.

“The current economic restrictions and sanctions policy, if maintained and not adjusted, are on track to hurt the Afghan people — through deprivation and famine — more than the Taliban’s brutalities and poor governance,” said John Sifton, the Asia advocacy director at Human Rights Watch.

Already in hospitals across the country are signs of a hunger crisis that could overwhelm the fragile health care system.

In a malnutrition ward of a hospital in southern Afghanistan, Shukria, 40, sat with her 1-year-old grandson, Mahtab, his mouth craned open but body too weak to let out a cry.

For weeks, the boy’s father had come home empty-handed from his mechanic shop as business dried up, and the family resorted to bread and tea for every meal. Soon his mother stopped producing milk to breastfeed, so she and Shukria supplemented his diet with milk from their family’s goat. But when they ran out of cash to buy food, they sold the animal.

“I’ve been asking this hospital to give me work,” Shukria said. “Otherwise after a week, a month, he will just end up sick and back here.”

Jim Huylebroek for The New York Times

Kiana Hayeri contributed reporting from Mazar-I-Sharif, and Yaqoob Akbary from Kandahar.

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Charting Global Economy: Latin America at Top of Inflation Wave – BNN

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(Bloomberg) — Sign up for the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

While prices are rising all over the world, the increases are especially striking in Latin America, which has the highest inflation forecast for both this year and next.

U.S. and U.K. inflation metrics recorded multi-decade highs, while big price jumps in New Zealand led the central bank to raise interest rates for the second time in as many months. India’s economy is showing signs of strengthening, while an increase in Covid-19 infections is denting business sentiment in Germany.

Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:

U.S.

Personal spending rose in October from a month earlier by the most since March, while a closely watched inflation measure posted the largest annual increase in three decades. The figures come as some Federal Reserve officials are advocating for a faster tapering of the central bank’s asset-purchase program than initially planned.

The supply crunch that’s helped drive inflation to multi-decade highs shows some signs of easing in the U.S. -– but it’s still getting worse in Europe. 

Applications for U.S. state unemployment benefits plunged last week to a level not seen since 1969, which if sustained would mark the next milestone in the labor market’s uneven recovery. However, the larger-than-expected drop was largely explained by how the government adjusts the raw data for seasonal swings.

Europe

German business confidence took another hit in November, with a new wave of Covid-19 infections looming over the economy and rising inflationary pressures threatening to weigh on manufacturing. Expectations for the next half year also worsened.

U.K. companies reported the strongest inflation in more than two decades during November, adding to pressure on the Bank of England to lift interest rates as early as this month. IHS Markit Ltd. said 63% of purchasing managers reported increased cost burdens, driving the fastest growth in an index tracking inflation since the report started in 1998. 

Asia

Singapore expects gross domestic product to expand 3% to 5% next year, a slower pace than this year as its rebound from the worst of the pandemic steadies. The first official forecast for 2022 compares with about 7% this year, the Ministry of Trade and Industry said Wednesday, reflecting the impact from easing pandemic restrictions and a stabilizing global economy.

China pulled back on its already halting progress toward meeting its U.S. trade deal targets, slowing purchases of all types of goods covered by the agreement despite calls from the Biden administration for Beijing to adhere to its commitments. 

Emerging Markets

Price surges are busting through policy makers’ targets in all of Latin America’s major economies, with annual inflation prints this month of 6% in Chile, 10.7% in Brazil and a whopping 52% in Argentina. Consumer prices in Mexico rose 7.05% in the first half of November from a year prior, the highest in 20 years.

India’s economy showed steady signs of strengthening in October as services, manufacturing and exports kept it on course to post the world’s fastest growth.

World

New Zealand’s central bank raised interest rates for the second time in two months and signaled it will need to tighten policy more quickly than previously expected to contain inflation.

©2021 Bloomberg L.P.

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