Interview : U Kyaw Kyaw Maung
How can the CBM maintain economic stability?
U Kyaw Kyaw Maung: First, it is important to note that the main cause of the depreciation of the Myanmar kyat in the second half of 2018 is the rise of the US dollar, which has had a similar impact on many other currencies worldwide. Another key reason for the depreciation of our national currency is Myanmar’s macroeconomic imbalances, particularly the relatively high trade deficit that began in 2013, which is still impacting us today.
The CBM aims to maintain price stability by absorbing excess liquidity. In the absence of a functional secondary market for Treasuries, we have held deposit auctions in order to effectively achieve this.
Moreover, we started offering two services to ease temporary pressures and promote foreign exchange rate stability. One is selling the US dollar through a daily foreign exchange auction. The other is allowing domestic banks to swap local currency in exchange for dollars, the execution of which will take either 14 days or one month, depending on the facility they choose.
How have the CBM’s policies and services helped banks facing liquidity issues?
KYAW KYAW MAUNG: The CBM uses its reserves to aim for domestic price stability. Reserve money is an operational target, while money supply is an intermediate target based on projected GDP growth and inflation.
Myanmar’s banks faced excess liquidity problems in the latter half of 2018, resulting in lower Treasury bills and deposit auction rates. This has forced the CBM to increase the amount of deposit auctions in order to help maintain the short-term interest rate. We also provide services to help meet the liquidity needs of financial institutions; banks can use government securities as collateral to borrow from the CBM, and then sell them back at a discounted rate. Our interbank market provides a solution to liquidity issues through short-term bilateral lending. This allows banks with a liquidity shortage to support those with an excess.
What capacity do foreign banks have to operate within Myanmar, and what changes could be made?
KYAW KYAW MAUNG: There are currently 13 foreign banks permitted to operate in Myanmar within a specific operational framework. Initially, they provided services only to foreign corporate clients, until we expanded their remit in December 2017, allowing them to provide export financing to local corporate clients. However, substantial progress could still be made. Banks need more time to develop their capacity to provide this service, partly because it is difficult to separate export from import financing.
To resolve the latter issue, we are now planning to allow foreign banks trade financing powers. This will enable them to offer import-related as well as export-related services, and soon foreign banks may be allowed full access to the local corporate market.
What can be done to address data protection and cybersecurity concerns?
KYAW KYAW MAUNG: The CBM has issued two key directives to ensure that mobile financial services are efficient, secure and operate within an enabling regulatory environment. One is the directive on mobile banking operations for banks, issued in 2013. The other is the mobile financial services regulation in 2016. We have so far allowed nine private banks to provide mobile banking services and issued a registration certificate to four mobile financial service providers.
Only banks and mobile network operators can now offer mobile financial services. We recognise that the current legal framework and data security measures require considerable improvement, but we are cautious about granting development permission for e-commerce and mobile payment methods. We understand the importance of such methods for the development of the financial sector, but we also see the risks associated with them. It is our aim to offset these challenges in order to ensure balanced growth in the market.
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