Narinjara News

Run on banks: Panic among Depositors

Sittwe, 22 February:   Traders and depositors in Myanma Economic Bank at Sittwe, capital of the western state of Burma, have been panicky as the State Central Bank issued an order two weeks ago, limiting the withdrawal to just half a million kyats a week  an amount worth about 450 US dollars, according to our correspondent.

For the workshop owners and small businessmen in the city, the amount is far less than what they need to run their enterprises let alone pay the employees, a disgruntled automobile workshop owner said.  The same is true with the wholesalers of cloth, toys, rice and cooking oil, and other commodities.  The order also raised a number of questions and suspicion in the way private banks are run, a retired bank manager said.  People are once again suspecting underhand dealings by the Burmese junta leaders in collusion with the bank authorities, and spreading speculations that the banks are facing a liquidity crisis, he added.

It all started when the private banks suspended all withdrawals the previous week, a university student told our correspondent.  All money transfers were also suspended in the process.  “People are hoping the worst demonetization of paper money after 1987 that will start a financial crisis to the already sick national economy,” she added.

Financial crisis is already in the offing in the Bangladesh  Burma border.  Last Tuesday, 11th February, the value of Burmese kyat all on a sudden appreciated against the Bangladesh Taka at Maungdaw  the border town, recording an exchange rate of 12 kyat to the taka, while on the previous day the taka was selling at 18 kyat unofficially.  In Burma, the unofficial rate of the currency exchange is considered as the standard since the junta imposed arbitrary exchange rate for the dollar is just around six kyat, while in the unofficial exchange it is well over one thousand kyat. By Monday last week three leading private banks suspended credit card services to defer the panic run on deposits.

The crisis was the result of rumours about the collapse of some twenty private banks that have been facing liquidity crisis for sometime, said a private bank manager. 

Across the western state the prices of essentials have once again shot up sharply: many wholesalers have stopped selling their commodities as the kyat has been jittery due to the crisis.  Essential commodities have plain vanished from the shops and many business concerns are heading for bankruptcy, said an export trader.  The situation is out of control now, and we are heading for another downturn in our national economy, said a bank manager. 

Along the Burma  Bangladesh border trading has stopped due to the abnormal exchange rate that has made the import of Burmese goods unprofitable, added our correspondent from Maungdaw. #