Myanmar wrestles with high inflation

Myanmar wrestles with high inflation

By Aung Hla Tun

YANGON (Reuter): Rocketing prices of essentials such as rice and cooking oil have sent inflation soaring in recent months, ringing alarm bells in impoverished Myanmar.

So severe is the problem that the military government has taken action to curb runaway prices, heading off the type of crisis that brought down the previous socialist government in 1988, private analysts and government sources told Reuters.

"The uprising and demonstrations that took place in 1988 were mainly because of the economic difficulties," Minister of Trade Lieutenant General Tun Kyi said at a recent symposium.

For the first time, after 26 years of isolation and self- imposed exile from the rest of the world, Myanmar is enjoying a heavy flow of foreign investment, mainly in the services sector, under the leadership of the ruling State Law and Order Restoration Committee (SLORC).

The growing foreign investment in the country, and strong economic growth and certain economic reforms fathered by the SLORC have all fueled inflation, analysts and government sources said.

The Minister for National Planning and Economic Development, Brigadier General David Abel, detailed Myanmar's hefty economic growth rates at a recent top-level coordination committee meeting.

He said Myanmar's economy as measured by gross domestic product is set to grow a provisional 9.8 percent in fiscal 1994- 95 (April-March) compared with 7.5 percent in 1994-95 and 6.0 percent in 1993-94.

Lieutenant General Tun Kyi put foreign investment in Myanmar, mainly from Singapore, Thailand, Japan and the United States, at end-December 1995 at a total of over US$3.0 billion.

"The issue of inflation is inevitable since more and more has to be invested for national reconstruction, but the rate of inflation must not be out of control," said General Than Shwe, prime minister and head of the SLORC, at a meeting last week.

He called for all-out efforts to bring down production costs by stressing frugality in spending funds. Commodity prices would stabilize and fall only when production and distribution costs fell, the general said.

Most of the side-effects of inflation are felt in major cities, the border region and the capital city of Yangon where the official food price index has jumped.

Official data shows the Yangon index rose to 853.61 (base 100 in 1986) up to October 1995 from 691.90 in fiscal 1994-95 and 418.65 in 1992-93.

Some residents attribute the jump in inflation to increased government taxes and utility rates. Others said domestic shortages of essentials may be due to excessive exports of some items to earn much-needed foreign exchange.

Asked what he exported, a local exporter who declined to be identified said "sesamum, pulses, onions, furniture, leather and marine products -- you name it." These are consumer items much sought after by local residents.

Electricity and water charges have gone up and parking charges, previously unheard of in downtown Yangon, were imposed a few months ago at a rate of 10 kyats per hour.

At the official rate, one U.S. dollar is worth 5.75 kyats while the blackmarket rate is about 125 kyats to the dollar.

Government-licensed exchanges convert one U.S. dollar into foreign exchange certificates at the rate of 123 kyats.

The price of a pyi (two kilos) of the most popular Emahta rice has now risen to 60 kyats at retail stores from the officially- announced cost of 41.11 kyats in 1993-94 and 11.72 kyats in 1991.

A viss (1.63 kilos) of cooking oil (groundnut oil) costs 200 kyats in shops now compared with official figures of 129.85 in 1993/94 and 66.51 kyats in 1991.

Two rounds of salary increases for civil servants in 1989 and 1993, the sale of subsidized commodities and free transport to work have all failed to cushion the effect of inflation, some government employees said.

"Each month, I get 16 pyis of rice at 15 kyats each, a viss of cooking oil at 38 kyats and some candles and soap," said U Than Sein, a branch clerk at a service enterprise.

"I wish the government could raise our quota of subsidized goods to meet our actual demand instead of raising our salaries again," he added.

"I also moonlight every evening as a taxi driver and earn about 250 kyats daily. The most precious thing inflation has robbed us of is our character," he said.

Struck hard by inflation, many experienced and educated employees of various ranks have left their jobs for greener pastures abroad or in the booming domestic private sector.

"In the past in Myanmar we never thought of changing our jobs, let alone our careers," said U Kyaw Maung, a university lecturer turned hotel supervisor. "Previously I got only 1,700 kyats per month but my salary is about 45,000 kyat now, not counting free meals and other facilities."

"I will not hesitate to change my career again if I get a better offer," he added.

The SLORC set up a task force of high-ranking officials from various departments to bring down soaring prices. The committee met merchants and wholesalers dealing in key consumer goods, but little has been heard of this panel in the official media.

"Life is not as easy as it used to be. What most people are longing for is not democracy, but only better earnings. It is high time they beat this enemy (inflation)," said a retired army officer.