Myanmar abolishes surrogate foreign currency

(Photo : Myanmartravel.cc)

Myanmar has announced the abolition of its US dollar proxy currency for foreigners. The Central Bank of Myanmar announced an initial period of 90 days for exchanging abolished Foreign Exchange Certificate (FEC) with foreign currencies or local currency Kyat starting on April 1.

FEC, which has been put into circulation in place of U.S. dollar for two decades, will be terminated for use on July 1. The period of exchange is extendable to March 31, 2014 for those who fail to do so during the initial exchange period for special reason.

Myanmar’s parliament approved on Mar. 20 the proposal for abolishing FEC which was first introduced in 1993. In the latest step towards economic normalization, more than US$30 million worth of Foreign Exchange Certificates (FEC) will be phased out of existence without giving a timeframe for the move, Finance Minister Win Shein told at the parliament.

There had been a total of 30.92 million units of FEC (1 FEC unit = 1 U.S. dollar) in circulation as of December 2012, according to the central bank.

“A scheme will be set up to systematically abolish FECs in collaboration with the Central Bank of Myanmar, government banks, private banks and related organizations,” Win Shein said.

Economists welcomed the move, which was expected as part of the country’s economic liberalization. A Myanmar economic expert said the announcement could be a new test of public confidence in the government’s handling of the economy.

In the past movements like this have caused panics, but there is greater trust in monetary arrangements now. Given the rise of the kyat, and depending on when they bought the FECs, many FEC holders might experience a considerable capital loss in kyat terms.

But Central Bank said that the move would have little impact because it is now possible for people to legitimately exchange their FECs for dollars.

Myanmar’s government has embarked on a series of political reforms since coming to power in 2011 that have caused the West to scrap or freeze most sanctions. The country also initiated a managed flotation of its currency in April last year, while it has also drawn up new foreign investment legislation in a bid to boost its attractiveness to international business.

FECs were previously seen as a means for the junta to earn greenbacks from tourists, who were at one point forced to buy several hundred dollars’ worth of the certificates when they entered the country. <Compiled from Myanmar’s official media>