In an effort to promote the depreciating kyat, the Central Bank of Myanmar announced that it was revoking foreign exchange licenses issued to hundreds of businesses. Effective October 19, 2015, companies must return their foreign exchange licenses by the end of November and will no longer be able to trade in U.S. dollars.
The government of Myanmar has permitted foreign exchange since 2011, and non-banking businesses had previously been allowed to deal in foreign exchange since the Foreign Exchange Management Law was enacted in 2012. However, in May 2015, the Central Bank halved U.S. dollar withdrawal limits in light of growing concerts over depreciation of the kyat.
Under the new policy announced October 16, banks and non-bank money changers will still be permitted to exchange foreign currencies, but other businesses that accept U.S. dollar payments such as hotels, hospitals, airlines, restaurants, tour companies, and supermarkets, among others, must give up their licenses. Banks are not affected by this policy change and prefer to have businesses uniformly transact in kyat.
The Central Bank of Myanmar aims to promote the weakening kyat, which has depreciated by about 25% against the U.S. dollar this year as a result of a strengthening U.S. dollar and Myanmar’s widening budget deficit. The Central Bank also hopes the new policy will prevent more widespread use of the U.S. dollar and encourage use of the country’s struggling local currency, particularly in the tourism industry.
Practically speaking, this new policy may be problematic for individuals from Myanmar who are considering making an EB-5 investment, as hundreds of businesses will no longer be able to transact directly in U.S. dollars. Consequently, investors will be required to raise more kyat to meet the minimum U.S. dollar capital investment amount given recent currency devaluation.
With the opening of Myanmar in recent years, it will be interesting to continue to monitor country developments to evaluate the viability of this market for EB-5 investment.