(Bloomberg) — The Central Bank of Myanmar ordered companies and individual borrowers to suspend repayment of foreign loans, the latest in a series of steps to defend the nation’s dwindling foreign exchange reserves.
In a letter to banks licensed to deal in foreign exchange, Deputy Governor Win Thaw directed borrowers to suspend the repayment of interest and principal of various foreign loans obtained either in cash or in kind. The directive requires licensed banks to inform their business customers with foreign debt to adjust loan repayment schedules with overseas lenders.
Companies in Myanmar have at least $1.2 billion in outstanding dollar-denominated loans, according to data compiled by Bloomberg. Those borrowers include Ooredoo Myanmar Ltd., a telecom company, City Square Commercial Co., a real estate firm, and telecom tower companies Apollo Towers Myanmar Ltd. and Irrawaddy Green Towers Ltd.
Myanmar’s military regime has tightened foreign exchange rules after the nation’s currency lost a third of its value against the dollar last year after the coup triggered a freeze on parts of the foreign reserves held in the US and suspension of multilateral aid — both key sources of foreign currency supplies.
Most foreign exchange earners are mandated to convert their currencies into kyat at the central bank’s reference rate of 1,850 to a dollar set in April, a move designed to shield the local currency from volatility.
The government has banned imports of cars and luxury items as well as tightened fuel and cooking oil imports to preserve its reserves. The regime is also allowing the use of yuan and baht for trade along the Chinese and Thai borders.
On Thursday, the central bank also allowed foreign institutions to establish wholly-owned non-bank financial institutions or enter into joint ventures, in a bid to boost foreign capital. The government earlier revoked exemptions given to registered companies with minimum 10% foreign ownership from the mandatory foreign exchange conversion rule.
Earlier this month, junta spokesman Major General Zaw Min Tun told reporters that Myanmar must spend about $700 million for domestic and foreign loan payments every year.
(Updating details on foreign loans in third paragraph.)
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