CNI News
4 July 2022
Despite the permission to accept Yuan and Baht payments in border trade with China and Thailand, exporters are required to deposit their export earnings from rice, pulses and beans, corn and oil crops at the Central Bank of Myanmar in US dollar as of 1st July, according to exporters and merchants.
The CBM sets the price of maize at US$ 360 per ton and will reimburse the export earnings in Myanmar kyat to exporters at the exchange rate of K 1850 per dollar after deducting 2 percent commercial taxes, Secretary U Thant Zin Tun of Myanmar Corn Industrial Association told the CNI.
“The government set the price of corn at US$ 360 per ton. It doesn’t matter whether you export corn at US$ 400 or 500 per ton. The government sets the corn price at US$ 360 per ton. Even if you get lower prices than the set one, you are required to deposit US$ 360 per ton. If you export 100 tons of corn, you will have to deposit US$ 36,000 at the CBM. The CBM will deduct seven dollars and two cents for commercial tax per ton and reimburse the remaining US$ 350.8 in Myanmar kyat at the fixed exchange rate of K 1850 per US$,” he said.
As exporters are required to deposit their export earnings in US$ at the CBM, which will reimburse Myanmar kyat at a fixed exchange rate that is lower than the market rates, exporters are likely to suffer exchange rate losses, according to exporters.
As exporters have to take the gap between the government exchange rate and market rates into consideration, they will have to buy crops from farmers at lower prices and farmers will get lower prices for their crops, U Thant Zin Tun added.
“As we have to pay K 2,200 or K 2,100 per US$ in the market, we have to suffer exchange rate losses of K 250 or 350 per dollar. If we have to deposit US$ 360 at the CBM for one ton of corn, we will lose K 108,000. So, we have to try to cover the losses. If we buy corn from farmers at K 1,100 per viss previously, we can pay K 950 per viss to cover the exchange rate losses caused by the government exchange rate at K 1850 per US$. Therefore, exporters will buy corn from farmers at lower prices,” he told the CNI.
Although the government has instructed traders to export rice, pulses and beans, corn and oil crops only in US$, the instruction has not been implemented in border trade with China so far, Vice Chairman U Min Thein of Muse Rice Exchange.
“The order was issued on 30 June. Prices of all commodities exported to China will be set in US$ and exporters will have to pay taxes in US$ in the same way as maritime trade. However, the order has not been enforced so far,” he said.
There is no exchange rate gap in the Yuan-Kyat direct payment system but exporters will have to suffer losses due to exchange rate gaps in the US$ payment system.
It seems that the government is hoarding US$ by issuing the order to export commodities in border trade in US$ and to deposit export earnings at the CBM but the orders create chaos in trade and commodity prices, according to exporters.
