Junta Plans Barter System to Cope with Desperate Shortage of Foreign Currency for International Trade
The Junta new economic plan: to implement the Barter Transaction Arrangement (BTA) system, facilitating trade through the exchange of goods, rather than currency transactions has sparked confusion and disbelief among local and foreign business communities.
On May 28, the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCC) issued notices to numerous trading entities, notifying them to transition to the BTA system for trade.
Since the coup, the junta has faced a collapse in exports and foreign direct investment. At the same time, Myanmar businesses can no longer access international loans with almost no US dollars flowing into Myanmar, the regime has had to sell the country’s foreign reserves. They want to facilitate trades in exchange for goods instead of using foreign currency for payment, and I believe the convenience of this approach varies based on the nature of the business”, a trader from Muse Township remarked.
Due to the Junta’s BTA system, export and import firms are required to engage in contracts with foreign counterparts for an exchange of goods, offering the advantage of exemption from central bank intervention and control over export revenues and foreign currency payments for imports.
Under the existing system, the central bank purchases 35 percent of foreign currency revenue from businesses exporting abroad at a fixed rate of 2,100 MMK per 1 USD, while the remaining 65 percent also needs to be sold at market value through the central bank’s online currency market.
As a last resort, the Junta is attempting to implement the BTA system in response to the domestic shortage of foreign currency, the drastic depreciation of Myanmar currency (MMK), and the skyrocketing prices of gold and USD, occurring over three years since the coup.
In the few countries where some partial barter system still exists, it only works on a government -to-government basis and not the private sector. It is a sign of desperation that the last time a barter system was in place in Myanmar was during dictator’s General Ne Win’s rule from the 1960s,an era of notorious shortages, economic inertia and isolationism.
The aforementioned trader from Muse said that at the moment ,”Our export business operates smoothly as it is. We sell goods to customers who pay for them, and we do not need to repurchase any goods from them.”
The Junta has set a higher trade value target for this fiscal year. However Popular News, citing the Ministry of Commerce under the Junta, reported that the trade value has actually decreased by over USD 220 million, compared to the same period last year.
Ethnic armed organizations (EAOs) have seized control of the China-Myanmar border trading posts, which were previously closed during conflicts in northern Shan State due to Operation 1027 and have since been reopened. However trade issues remain stalled due to the Junta’s continued restrictions.
Many traders have also halted their operations, while others are endeavoring to reach Mongla and Tachileik via Mongping and Kengtung in eastern Shan State to resume trade activities.
