“Public trust decline in Myanmar currency has affected local market from roadside vendors to wholesale center.”


The military council issued K20,000 banknote on 31 July to commemorate the completion of Maravijara Buddha Image and one-year birthday of  their Rattha Nandaka   white Elephant. Early news about this denomination caused chaos in the markets of gold, US dollar and basic commodities.

 This interview with U Tint Lwin, the chairman of Public Account Committee in Yangon Region Hluttaw of NLD government and experts in banking services, is about the repercussion of new denomination, impacts on economy and banks, situation of banking services under the military regime and prospects of NUG’s Spring Development Bank.

TLT: What is your view on the military council’s new K20,000 banknote, and how will it affect the banks?

U Tint Lwin:  The new banknote will not have direct effects on the bank. It is concerned with the use of money. Public trust on the bank lost when the banking services were suspended after military coup. As a result, deposit of public declined. As trust on cash has fallen, customers withdraw their money from the bank to buy materials. When the remaining market has deteriorated, people have lesser options for their business. They will invest in gold, property and cars. None of these markets is not stable and it is not possible to forecast their market trend. We do not hear that customers are withdrawing their money from the banks. However, trust of people on money has weakened.

TLT: How can K20,000 banknote circulation impact Myanmar’s economy?

U Tint Lwin: I think that the military council circulated K20,000 banknote to address their financial crisis. They did similar way in the past. The military printed out excessive amount of banknotes for K10,00 and K5,000. As the current amount of money will not be reduced in the market, inflation will increase by double. It is normally calculated that the value of money will decline by half. Trust on Myanmar currency will be lost. It will also impact export sector which has already weakened. Local commodity market for export items is not stable amid inflation and decline of Kyat value. Public trust decline in Myanmar currency has affected local market from roadside vendors to wholesale center.

TLT: What are difficulties of banking sector under military regime, while public trust has declined?

U Tint Lwin: Banking industry has seen significant changes after the military coup. Foreign experts are confused with Myanmar’s banking sector. Private banking sector emerged recently. Private banks were nationalized under the administration of Anti-Fascist People’s Freedom League. The former military regime allowed establishment of private banks around 1991. However, the number is still very few for the country. Financial support of private banks is required for the business development of the country.

The state-owned banks give loans, and banking sector has developed now. But, the banking services are not sufficient for the country. The banks did not collapse as they take collaterals for loans.

Other service agencies also give loans like banks. When these agencies collapsed, public trust on the banks was lost. Some private banks such as the  Asia Wealth and the May Flower collapsed.

Some people confused agencies with banks. So, their trust on the banks declined. After the coup, cash flow slowed down, and banking services stagnated. It was a bad sign  for the bank. The decline of private banking sector caused to lessen their income. As the banking sector is not significantly larger than the market, they are operating normally, and the will not collapse.

TLT: Military council frequently sold the state’s treasury bonds at present. What will be its consequence?

U Tint Lwin: The sale of treasury bond was also made in previous governments. During the term of NLD government, Hluttaw approved the sale of treasury bonds from the Central Bank to fulfill the budget of government. The loan of government from Central Bank can increase inflation. To control this situation, Hluttaw advised the sale of treasury bonds to people through interest in market rate. The civilian government systematically did it without neglecting liquidity ratio. If the banks have accumulated immovable property, their liquidity ration will decline. More moveable property will help their banking services.

The sale of treasury bond can make money easily. The civilian government asked the banks to sell treasury bonds without putting any pressure, and the banks can make independent decisions on this. At present, the banks are likely to be forced to buy treasury bonds with the public deposits.

Actually, both treasury bonds and treasury bills are other types of loans from which both capital and interest will be get back. However, the excess amount of sale was seen as taking huge loan from people and banks. These money were not totally lost. But the administration sought all the sources of possible funding. I want people to know the reality. While they have deposited their money in the bank, they should not lose their trust on the banks. It will lead to negative consequences for the country. On the other hand, money from treasury bill will be get back in three or four years. However, during this period, authorities will use money.

 TLT: What is your view on Spring Development Bank of NUG?

U Tint Lwin:  NUG set up this bank in timely manner to fulfill financial need. However, there are many difficulties in this project. It is not easy to set up a bank. NUG established an interim central bank very recently. So, Spring Development Bank can be regarded as a state-owned bank and it may be changed into a public bank. At the moment, it is under the management of NUG. The bank will be operated with about 1,000 accounts in its pilot project, and then will be expanded for online banking service which have many advantages. It is more suitable for NUG. The first step was begun with 10,000 account to ensure a reliable financial mechanism. I hope it will be managed by international experts systematically. I am monitoring it with much interest. But it could not provide many services expected by people in a short time as systematic preparations are needed to fulfill the need of financial sector for the people and to launch attack on financial sector of the military council.


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