Myanmar’s freefall into failed state status is starkly evident across the multiple battle zones of the countryside but arguably the most alarming decline is being felt in the fast-collapsing economy.
The post-coup State Administration Council (SAC) junta has transformed what was once a promising “last frontier” Asian developmental state into a war economy predicated on regime survival.
The opposition National Unity Government (NUG) presented grim findings on the state of the economy in a lengthy press conference on May 3, with Minister of Planning, Finance and Investment Tin Tun Naing and ministry advisor Sean Turnell outlining the doom loop of decline the SAC has orchestrated.
In recent weeks, the Myanmar kyat has fallen to 5,000 to the US dollar, marking a historic low. The kyat is now at 25% of its 2019 value, just before the twin disasters of the Covid-19 pandemic and the February 2021 coup.
The military has responded to the economy’s collapse by rolling the monetary presses, printing an estimated 25 trillion kyats since the coup, fueling inflation and economic instability. Myanmar’s currency reserves have fallen by US$3 billion over three years.
According to Turnell, “(w)ith the kyat in freefall, the main plank of SAC economic policy is now very simple – to secure as much foreign exchange as possible to allow it to buy the weaponry and munitions it needs to survive.”
Military spending is now estimated to consume 60% of the national budget, with disastrous effects for health and education allocations.
People living in dire poverty now represent 40% of the population, with an average household “food basket” increasing by 140% over the past three years. Many basic items are now beyond the reach of many Myanmar people.
This will be especially felt in conflict zones where fighting has severely disrupted supply chains and markets. That’s been deliberate in war zones in Rakhine State, where the SAC has blockaded key cities such as Sittwe to limit access to basic foodstuffs and fuel.
At the same time, the regime has instructed Myanmar businesses to “suspend interest and principal repayments on approved loans made by foreign lenders”, essentially a state-enforced loan default.
In a bizarre retrograde move, the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCC) called on businesses to adopt a Barter Transaction Arrangement (BTA) system for trading, an almost pre-industrial practice. Banks are now essentially “zombie entities” according to Turnell, kept on life support by the regime but essentially non-functioning.
Exacerbating the apocalyptic conditions, electricity supplies have sharply declined, including in key cities such as the commercial capital Yangon. Meanwhile, the new Military Service Law, enacted in February to bolster the military’s ranks, has driven thousands of young people into exile or the arms of anti-SAC insurgents: a brain drain mirroring the nation’s capital flight.
Yet many foreign visitors to Yangon remark upon its relative calm, indeed apparent vibrancy. This may well be a surface-level mirage.
Despite some dire predictions of a major rise in urban warfare operations in late 2023 that didn’t materialize, the real threat to regime stability in urban areas likely comes from economic desperation and declining living standards, which was a major factor behind the Saffron Revolution demonstrations in 2007.
The SAC is clearly rattled and is now taking draconian steps to try and stabilize an economy they themselves have crippled.
A key economic figure in the regime, former Commerce Minister Aung Naing Oo, was recently “permitted to resign”, Myanmar military jargon for being fired, as Union Minister of Ministry 3, completing what was seen as a gradual fall from favor of SAC strongman and coup maker Senior General Min Aung Hlaing. Maung Maung Win, deputy minister of the Ministry of Planning and Finance, was “sacked” the same day.
There are also widespread and credible rumors that several prominent economic figures have been outright detained by the regime. Central Bank of Myanmar (CBM) Governor Than Than Swe was apparently detained at Mingaladon Airport in Yangon before she could board an international flight and was sent instead to the military fortress capital of Naypyidaw.
Just days before, she had met with senior representatives of major Thai banks where they reportedly discussed “(CBMs) established policies to stabilize the foreign exchange rate, remittances of trade and Myanmar migrant workers to be diverted from legal channels instead of using illegal Hundis (informal, or underground, financial services), facilitation of smooth delivery of the wages of expatriate Myanmar workers in Thailand to their families, more investments from Thailand in Myanmar…provision of financial support…to further develop trade between Thailand and Myanmar, foreign exchange rates and the facilitation of foreign currency transfers between the two countries.”
Than Than Shwe is perceived as a regime loyalist and was badly wounded in a targeted assassination attempt in April 2022 by an anti-regime armed group. She survived and was promoted to the role of governor soon afterward. In September 2023, she and 43 other CBM staff were designated as “terrorists” by the NUG for financing the SAC’s war effort.
The kaw la ha la (rumors) that infuse all Myanmar political dynamics have been in overdrive with speculation that key business cronies such as Serge Pun from Yoma Bank and Aung Ko Win from Kanbawza Bank have been detained, along with others.
The SAC is alleged to have kept many key business identities on a form of restricted travel to Singapore and Bangkok. Aung Ko Win’s daughter, a Kanbawza executive known as Nang Lang Kham, was reportedly detained by military intelligence at Mingaladon in May 2022 while trying to fly to Thailand, although she was not arrested.
On the same day as the CBM governor met with Thai banks, the central bank ordered 16 Facebook accounts used for foreign currency transactions closed and warned “those who are illegally trading and speculating in foreign currencies…will be prosecuted under Sections 38 and 42 of the Foreign Exchange Management Law, as well as under sections of the Penal Code for harming the public interest.”
On June 4, it was announced that 14 currency traders had been arrested and 11 others had their photos and addresses listed and were at large for the alleged offense of being “engaged in speculation to hinder the country’s economic development.”
Meanwhile, some money changers who allegedly violated the rules and regulations set by the CBM to “destabilize” the economy have also been targeted. Analysts say this is clearly a mark of the regime’s frustration that so many people are seeking to circumvent measures that are causing the economy to crumble.
On June 3, state media announced the arrest of 21 gold traders, most of them in Yangon, for the crime of “committed instability of prices in the domestic gold market.” A further ten traders had their photos and business addresses published and the public was “urged to secretly inform relevant security forces about those evaded suspects.”
Next to be targeted were five real estate brokers charged with “illegally” selling condominiums to Myanmar nationals in Thailand, marking yet another desperate measure to stem the rising tide of capital flight and keep hard currency in Myanmar.
Exacerbating the downward spiral is the intensifying criminality of the Myanmar economy. The most dramatic evidence is the repugnant scam center system of Shwe Ko Ko, KK Park and many other locations. It’s unclear how much the SAC collects from the centers, which have been estimated to churn billions of dollars’ worth of ill-gotten gains.
At the same time, drug trading, wildlife smuggling and human trafficking are also all reportedly intensifying, with Myanmar topping the list of 193 countries of the Global Organized Crime Index. Tellingly, the Financial Action Task Force (FATF) placed Myanmar on their blacklist for money laundering practices last year.
And yet, in a compulsion that has gripped successive military regimes of the past, petty crime or informal trade is targeted by the absurdly named “Illegal Trade Eradication Steering Committee” that seizes everything from timber, unregistered motorbikes, lightbulbs and “DeeDo” orange juice made in Thailand and traded “without official documents.”
As economic conditions deteriorate and the Myanmar population becomes more desperate, the regime is ensuring loyalty by expanding official predation and bribery for lower-level officials.
By all measures, the SAC has fundamentally abandoned its economic responsibilities to the Myanmar population. And by all signs, Min Aung Hlaing would prefer to be the lord of the wasteland rather than seek a negotiated peace that would allow for rebuilding the war-devastated economy.
Turnell’s remedy for the meltdown? Crank up a range of financial measures to hasten the demise of the SAC. “Sanctions must be about inhibiting the junta’s capacity to wage war. Capacity must be the focus, not sentiment or signaling,” said the Australian economist and NUG advisor who was imprisoned for nearly two years in the coup’s aftermath.
Yet Myanmar’s people shouldn’t expect much help from the international community, though heavier targeted sanctions aimed specifically at the junta’s commercial interests is the least the outside world could do to degrade the SAC’s war economy and its staying power at this post-coup stage of rising vulnerability.
David Scott Mathieson is an independent analyst working on conflict, humanitarian and human rights issues on Myanmar