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The
financial sector in Burma is highly undeveloped. The structure
of the banking system falls under the Financial Institutions
Law of 1990. The Central Bank requires banks to report on a
monthly basis, and regulates lending amounts, interest rates
and reserve requirements. Negative real interest rates cripple
the banking sector. Lending rates range from 17 - 21% while
rates on deposits range from 12 - 16%. Rampant inflation
continues to erode the value of the local currency and serves
as a disincentive to savings.
Private
banks, which are generally more efficient than state banks,
have absorbed a significant amount of banking activity over
the past decade. In March 1998, however, the foreign exchange
privileges were revoked from the nine formerly approved
private banks. Since March, only the state-owned Myanma
Foreign Trade Bank (MFTB), Myanma Investment Commercial Bank (MICB)
and Myanma Economic Bank (MEB) have been allowed to deal in
foreign exchange. The MFTB handles foreign currency
transactions for individuals and the MICB for companies. MEB
handles foreign currency transactions in border trade regions.
A
1990 banking law permitted foreign banks to open branches in
Burma. These offices fall under the jurisdiction of the
Central Bank and serve as a trade and commerce liaison for
local and foreign clients. As of September 1998, there were 43
foreign bank representative offices in Burma; seven such
offices closed in the past year. No U.S. banks have
representative offices in Burma.
Foreign
Exchange Controls Affecting Trade
The
Burmese currency, the kyat, is not convertible and is
artificially pegged to the IMF's Special Drawing Right (SDR).
This
overvalues the currency by some 60 times. International trade
is almost exclusively conducted in hard currency, usually U.S.
dollars.
Availability
of Financing
Until
1988, Burma relied heavily on foreign assistance and
concessional loans to finance major projects in mining,
agriculture, infrastructure and other areas. Following the
military government's violent suppression of a pro-democracy
uprising in 1988, most multilateral and bilateral assistance
was suspended, including U.S. aid. Because of its inadequate
narcotics suppression efforts, serious violations of human
rights and lack of progress toward initiating domestic reform,
Burma is ineligible for U.S. aid and the United States and
other countries oppose loans and financial assistance to Burma
by multilateral financial institutions. The U.S. EXIM bank
does not loan to Burma nor does OPIC operate here.
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General Section
