CBM Relaxes Foreign Exchange Restrictions on Exporters

On 5 December 2023, the Central Bank of Myanmar (“CBM”) announced, through its letter no. 1/2937 (“Letter 1/2937”), that it will no longer determine the foreign exchange rate on foreign currency transactions made through authorized dealer (“AD”) banks via the foreign exchange online trading system.

Consequently, sellers and buyers are now free to determine the foreign exchange rate for their transactions based on the market rate. At the same time, outbound foreign currency remittances must still adhere to the procedures issued by the Foreign Exchange Supervisory Committee.

The regulation outlined in Letter 1/2937 is a rare relaxation of the stringent foreign currency controls the CBM has previously imposed.

One day after the issuance of Letter 1/2937, on 6 December 2023, the CBM released Notification 26/2023 (“Notification 26”), further reducing the percentage of export earnings that exporters are obligated to convert into Myanmar Kyat using the official exchange rate set by the CBM from 50% to 35%. Notification 26 takes effect immediately, and any non-compliance will be subject to the actions specified under the Foreign Exchange Management Law.

It appears that through these actions, the CBM is aiming to encourage and boost the country’s exportation, since exporters stand to gain the most from these relaxations. They can now retain a higher percentage of their export earnings (from 50% to 65%), and they now have the flexibility to sell the remaining foreign currency at a negotiated rate agreed upon with buyers through AD banks.

On the other hand, we anticipate that these new regulations will have an impact on importation, potentially requiring importers to spend more to acquire the necessary foreign currencies for their imports. This, in turn, may lead to a temporary increase in prices or shortages of certain imported goods in the country.