RANGOON — The arrival of a new Burmese bank note with a face value of 5,000 kyat (about US $5) is being viewed with concern and suspicion by many people, from housewives to economists. Some see it as a move by junta leader Snr-Gen Than Shwe to consolidate his power after consulting soothsayers.
A cross section of Burmese public opinion interviewed by The Irrawaddy in Rangoon agreed that the arrival of a 5,000 kyat note in an economy where the highest denomination at present is 1,000 kyat ($1) will mean a rise in the cost of living. The announcement alone that a 5,000 kyat note is to be issued on Oct. 1 caused the exchange rate of the Burmese currency to drop and gold prices to rise.
Economists interviewed by The Irrawaddy agreed that the new banknote was being introduced at an unfavorable time into an uncertain economic environment.
"While the current global economic crisis drove gold prices lower and created instability for the US dollar, the Burmese kyat appreciated in value,” said one Rangoon economist. “Burmese producers and business people trusted the kyat rather than gold or dollars. The government should have maintained the kyat in this position of trust and should not have issued this new note.”
Many academics and experts agreed that the government was introducing the 5,000 kyat note to ease the budget deficit problems created by excessive spending.
“The government built Naypyidaw, it has increased the salaries of public servants many times over, the military has been consuming more and more. It is obvious that the junta is issuing the new currency notes because of its budget deficit", the Rangoon economist said.
At street level, the introduction of the 5,000 kyat note is likely to hit Burmese traders and consumers alike, experts agreed.
Banknotes in denominations of 50, 100 and 200 kyat are already in short supply and could become rarer after they are joined by 5,000 kyat notes.
“There will definitely be a problem when it comes to changing money and prices will inevitably rise,” said a Dagon University economics lecturer.
“For instance, if there is a limited supply of smaller notes in circulation, goods previously priced at 250 kyat could be sold at 300 kyat, a 400 kyat price tag could become 500 kyat,” he explained.
Economists agreed that the government could help ease inflationary pressures if it kept the general public fully informed about its economic policies.
"The government can prevent hyper-inflation if it lets the public know the total value of the new notes and also makes sure there are sufficient supplies of the smaller notes in circulation,” said one university economist.
“I’m not saying there won’t be inflation, however,” he said. “The new notes will definitely have an inflationary impact.”
One researcher said it could take six months or a year for the inflationary effect of the new banknote to take effect, although there could be further short-term movements in the price of gold and the exchange rate of the dollar as business people looked for secure places to park their kyat holdings.
"Industrialists and business people fearful of a drop in the value of their assets will look for alternatives, such as gold, US dollars or real estate,” said a Rangoon businessman. “The prices of these assets will then soar.”
Many Burmese believe the reason for the introduction of the 5,000 kyat note is based not on the material foundations of economic policy but on another of Than Shwe’s whims.
The Burmese for the number 5,000 is nga htaung—which also happens to mean “I am still standing” or “I am surviving.”
Some draw attention to the bizarre decision by the former dictator Ne Win to introduce new banknotes in denominations of 45 kyat and 90 kyat. “Nine was his lucky number,” said a Rangoon resident. Similarly, Than Shwe is issuing a 5,000 kyat note after advice from his astrologer.”
The white elephant that appears on one side of the new note also has mystical meaning, according to some.
Since the 1988 coup, Burmese banknotes have carried the picture of a lion, which replaced the portrait of the country’s independence hero Aung San.
Old banknotes with the portrait of Aung San are hoarded in many Burmese households.
“People they feel some kind of trust in banknotes bearing the portrait of Aung San,” said a professor at the Rangoon Institute of Economics. “If you want the people to maintain their trust in their country’s currency, it should be engraved with the emblems and symbols which people value.”
irrawaddy
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