Myanmar’s Post-Coup Reality

Myanmar’s junta leader Min Aung Hlaing has pledged to prioritize economic growth in 2024, blaming the country’s economic contraction on the opposition he ousted three years ago. The economy has shrunk by 10-12% since the Feb. 1, 2021 coup, and the World Bank predicts only 1% growth in 2024 due to a broad-based slowdown across productive sectors. Over half of the population lives below the poverty line, and 40% of surveyed families saw a decline in income in 2023 compared to 2022.

The kyat currency has lost half of its value since the coup, and the State Administrative Council (SAC) has given up any hope of controlling it. In December 2023, the Central Bank of Myanmar announced it would no longer fix the exchange rate, allowing the currency to trade at market prices.

This acknowledgement that the gap between the official rate of 2,100 kyat per U.S. dollar and the black market rate of 3,500 kyat per greenback was too large to ignore, and the regime no longer had foreign exchange reserves to prop up the declining kyat.

The shortage of dollars also portends a further energy crisis, with electric black-outs and gasoline and diesel shortages increasing in late 2023. The SAC had subsidized energy imports by making dollars available to politically-connected energy importers at below market rates, but the junta no longer can afford that. In late December, reports of tankers refusing to unload in Yangon’s Thaliwa port indicated a dire shortage of dollars.

The Myanmar regime has been encouraging border trade with China and Thailand, but the loss of key border areas is hindering progress. The Three Brotherhood Alliance, comprising the Arakan Army, Myanmar National Democratic Alliance Army, and Ta’ang National Liberation Army, now controls almost all towns along highways 3 and 34 to the border. Ta’ang National Liberation Army forces have captured a military camp as far west as Nawnghkio, but the Air Force has intensified airstrikes to retake the town.

Karenni forces now control much of the state, including trade routes to Mae Hong Son in Thailand. The Karen National Union has been reshaping its Thai border presence amid $500 million in lost border trade due to fuel prices, border delays, and increased transportation costs following Operation 1027 in northern Shan State.

The Myanmar government has faced significant challenges in various sectors, including the closure of factories, stagnant wages, inflation, and the agriculture sector. The SAC stopped supplying fuel to industrial estates in late November, leading to 33% of factories shutting down. The garment sector has also experienced closures, with 271 factories shutting down due to shortages of foreign exchange, high energy prices, loss contracts, and foreign investor unease.

The junta has refused to increase the minimum wage for workers, instead offering a 1,000-kyat daily allowance. The agriculture sector is affected by weather changes and import shortages. In September 2023, the junta imposed price ceilings on wholesale rice trade to stabilize prices. U.S. sanctions and Singapore’s closure of Myanmar-linked accounts further exacerbate the situation.

In December 2023, three Myanmar nationals, including Sky Aviator CEO Kyaw Min Oo, were convicted of smuggling 508,925 Singapore dollars, highlighting the dire shortage of foreign exchange and the extent of Singaporean authorities enforcing sanctions on the military regime.

Thailand’s trade deficit reached $1 billion in the first half of the 2023-24 fiscal year, with the entire deficit for fiscal 2022-23 being $732 million. Exports fell by $400 million in the last nine months of 2023, impacting tax revenue. Businesses operated at 56% of capacity, affecting tax revenue. The junta is imposing a 2% tax on remittances sent home by the estimated 5 million overseas workers.

In September 2023, the regime arrested Lt. Gen Moe Myint Tun, chaired the Central Committee on Ensuring the Smooth Flow of Trade and Goods, and his deputy and deputy minister of commerce. The regime has also interrogated businessmen and arrested 16 edible oil traders. The junta is a self-serving and corrupt institution incapable of competent military and economic decision-making, and its collapse is imminent.

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