Myanmar’s military administration is proceeding towards tightening its hold over the movement of foreign currency. On April 3, 2022 CBM (Central Bank of Myanmar) issued various directives for all citizens, companies, business ventures, and all other organizations to convert their foreign currency income earned from abroad to kyat (MMK) within a short period of one working day of receipt. These directives are effective immediately for all transfers, and apply retroactively to foreign currency balances present in the nation. Since last year with the invasion of civilian government in Myanmar, their economy is suffering issues and is not stable.
1. First notification was issued on April 3, 2022, Notification no.(12/2022) which describes that all banks which have Authorized Dealer Licenses (“AD Banks”) are directed to implement foreign currency conversions (“Notification 12/2022”). The directive further provides that the foreign currency earnings of domestic residents from outside of the Union must be returned to the foreign currency bank accounts opened at AD Banks in Myanmar and that earned amount must be exchanged into Myanmar Kyats within one working day, except as otherwise allowed as an exemption. Notification 12/2022 comes into effect from 3 April 2022 and revokes the previous Notification 35/2021 issued by CBM regarding the sale of export earnings within 30 days.
As per the Notification No. (12/2022), domestic resident means:
A. Person who have resided or have had their main establishments in the Union for a period of at least 183 days during the preceding 12 months, with the exception of diplomatic personnel servant from foreign countries and foreign civil servants who carry out similar assignments.
B. Companies, organizations and offices formed legally under any domestic/local law and companies, organizations, offices and branches formed legally in the Union under any foreign law.
C. Diplomatic servants or other servants appointed by the Union in foreign countries.
If anybody fails to comply with Notification 12/2022, will lead to imprisonment for a term not more than for a period of one year or fine or both in accordance with the Foreign Exchange Management Law.
2. Second directive, Notification No. (4/2022) was also issued on April 3, 2022, which clearly specifies and directs the authorized dealer banks (“AD banks) that commencing from April 4, 2022, foreign currency income earned outside the Myanmar from both trading and non-trading shall be converted within one working day to his/her Myanmar kyat account at the rate of MMK(1,850) per USD. The conversion of other overseas currencies shall also be calculated based on the rate of MMK (1, 850) per USD. This notification also states that to transfer the foreign currency out of Myanmar the approval of Foreign Exchange Management Department is mandatory/ compulsory.
3. Another directive, Notification No. (5/2022) was issued on April 5, 2022, which specified that union government and ministers are exempted from notification no. (12/2022) and (4/2022).
4. CBM issued Notification No. (6/2022) on April 5,2022, which tells about the process which is to be followed by the AD banks for the conversion of foreign currency income into MMK, based on the different categories of income within one working day at the prescribed exchange rate which is MMK(1850) per USD. The process is laid down as follows:
1. Export income- Credit the foreign currency account of the relevant company on the date of the receipt of the export income and convert it into Myanmar Kyat account.
2. Other income including services- Credit the foreign currency account of the relevant company or individual on the date of the receipt and conversion to Myanmar Kyat account.
3. Funds for investment- Credit the foreign currency account of the relevant company on the date of the receipt except for foreign currency exempted by FESC and conversion to Myanmar Kyat account.
4. Offshore loan for investment- Credit the foreign currency account of the relevant company on the date of the receipt except for foreign currency exempted by FESC after scrutinizing whether there is prior CBM approval for offshore loan and conversion to Myanmar Kyat account.
5. One-sided transfers- Credit the foreign currency account of the relevant company on the date of the receipt except for foreign currency exempted by FESC after scrutinizing whether there is prior CBM approval and conversion to Myanmar Kyat account.
It is further stated that payments to outside of the Myanmar shall also require prior approval of FESC. The AD banks shall sell USD to the purchasing customer at a rate specified by the CBM and collect MMK (3) per USD for service charges. These payments are as follows:
- Payments for imports (including advance payments)
- Payments for services and other expenses
- Payment of dividends and repatriation of invested capital
- Transfers for investment abroad
- Repayment of offshore loans’ principal and interest
- Payments related to transfer of expenses as stated in section 27 of Foreign Exchange Management Regulations which include foreign trips, medical treatment, schooling charges and examination fees, attending conferences and workshops, living expenses for family members residing in abroad up to USD10,000 or equivalent foreign currency.
The notifications issued is responsible for notable changes to the holding of foreign currencies in foreign currency accounts in Myanmar and on the transferability of foreign currency for business purposes, wherein it is believed to have more rigid requirements and scrutiny.
The population of Myanmar, specifically the business class is not satisfied with the implementation of these rules and foreign business companies have also started protesting against these rules. An official statement has been given by the American Chamber of Commerce and British, French, Australian chambers and similar groups which states that the requirement to swap all dollars and other foreign currencies for kyats would lower Myanmar standards of living, discourage foreign business activity and foreign investment and cause trade tensions. Japanese embassy also submitted a letter to the Myanmar government stating that the Japanese business shall face enormous difficulties in the conduct of business as per the new regulations.
Myanmar has been ruled by the military for most of the time since it gained independence from the British in 1948. But for about a decade beginning in 2011 the country came under the umbrella of democracy and its economy started rising as it opened further to foreign investment. But in February 2021 there was again military takeover in Myanmar which ousted the elected government and since than the economy of Myanmar is still struggling. Various major foreign businesses have opted to leave since the military seized power in 2021, citing rising risks and a deteriorating business environment. Presently the Notifications issued by the Myanmar government for the movement of foreign currency is being highly criticized throughout the world as these rules would lead to cut-off Myanmar from international trade and economy.