While natural gas exports have brought a large amount of foreign currency revenue to the Government of Myanmar, their contribution to reducing monetization of the fiscal deficit and disinflation has been obscure. The immediate reason is that under the country’s dual exchange rate system, the revenue is converted at the grossly overvalued official rate which undervalues it in terms of the local currency. However, without sterilization, devaluation would only improve the fiscal balance and not reduce the excess money supply. Furthermore, given the ongoing sharp appreciation of kyat, unifying the foreign exchange markets might further aggravate the appreciation and cause damage to the export industries. As a policy reform, this study proposes the unification of foreign exchange markets along with the deregulation of the strict controls on imports.


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pp. 374-387
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