If you need cash in Myanmar, you must get up early. Queues start forming outside banks at 4am, where the first 15 or 30 customers are given a plastic token that allows them to enter the bank when it opens at 9:30am and withdraw cash, according to more than a dozen people who spoke to Reuters.
If you do not get a token, you either need to queue for hours for the few functioning cash dispensing machines outside or go to black-market brokers who charge large commissions.
The cash crisis is one of the most pressing problems for Burmese after the Feb. 1 military coup. The Central Bank of Myanmar, now run by a junta appointee, has not returned some of the reserves it holds for private banks, without giving any reason, leaving the banks short of cash.
The banks themselves have been closed or open only intermittently as many staff have gone on strike to protest the coup. Meanwhile, Internet outages make online transactions difficult and international transfers have largely stopped working.
That presents problems for individuals and small businesses as they try to navigate an economy rapidly crumbling under the country’s new leaders and the collapse of tourism, one of Myanmar’s fastest-growing sectors. The Burmese kyat has dropped about 20 percent in value since the coup.
“It’s now very difficult to operate a business,” said Hnin Hnin, an entrepreneur in her mid-20s who supplies shampoo and bedsheets to high-end hotels. “Traders don’t accept bank transfers now. They want cash. So we need to find the cash.”
As a result, Hnin Hnin, who agreed to be identified only by a part of her name to discuss sensitive matters, has been one of the thousands of people lining up daily in front of the few functioning cash machines in major cities.
Some people band together in groups of five, she said, so one person can take out money for the whole group.
She has also been forced to figure out ways to pay her suppliers overseas by making an agreement to swap money with a partner holding cash in an account in Thailand. Under the agreement, the partner gives Hnin Hnin access to her Thai baht account so that she can pay suppliers in Thailand, and Hnin Hnin pays her back with physical kyat notes in Myanmar.
The central bank and the junta did not respond to requests for comment.
Reuters put questions to Myanmar’s four largest private banks, including Kanbawza Bank and CB Bank. They also declined to respond.
It is almost impossible to get hold of US dollars or other overseas currency at regular exchange centers in Yangon, a dozen people told Reuters.
Black-market traders take online transfers in exchange for physical notes in various currencies, but add a commission of up to 10 percent, they said.
Myanmar’s private banks were in trouble long before this year’s coup.
This was partly due to their habit of lending money to well-connected customers who rarely bothered to pay them back, at least four bankers, including the then-deputy central bank governor, told Reuters in 2017.
The coup and the protests against it mean that there is no functional banking system, said Richard Horsey, a political analyst specializing in Myanmar.
“You have a three-pronged hit to the banking system,” Horsey said. “The pre-existing problems with the banks, which will be all the more difficult to resolve now; you have the economic impact of the coup, which has produced a virtual hard stop to the economy without any kind of ability by the regime to manage that or inject stimulus; and then you have the banking sector strike itself.”
People want to withdraw cash to buy food and other essentials, and also because they fear that the banking system is going to collapse, Horsey said.
The cash crisis is the most immediate sign of much deeper economic problems facing Myanmar, some experts said.
Financial research firm Fitch Solutions last month said that it expected Myanmar’s GDP to shrink 20 percent this year.
The UN Development Programme (UNDP) last month said that Myanmar faces economic collapse due to the combined effect of COVID-19 and the coup, which in its worst-case analysis could put nearly half the country’s 54 million people into poverty, compared with about one-quarter in 2017.
“If the situation on the ground persists, the poverty rate could double by the beginning of 2022,” the UNDP said in its report. “By then, the shock from the crisis will have resulted in significant losses of wages and income, particularly from small businesses, and a drop in access to food, basic services and social protection.”
Millions are expected to go hungry in the coming months, the UN World Food Programme said in an analysis published last month.
Some workers have trickled back to resume their jobs at banks in the past few weeks, but financial analysts see no immediate alleviation of the cash shortage.
In Yangon, the country’s commercial capital, an egg and cooking-oil trader who identified herself as Khin said that the flow of her products and other agricultural commodities had slowed substantially and was no longer sufficient, forcing her to raise prices by 25 percent.
“Farming in rural areas has already slowed down and the impact will be huge in the next season,” Khin said. “Bean suppliers and chicken farm owners aren’t sure if they can start another cycle.”
While groceries are available in markets and shops, some country analysts said they worry that farmers could lose access to seeds or the credit to buy them before the monsoon planting season next month.
The commercial chain has been grinding to a halt, said a major rice trader who works with hundreds of Burmese farmers.
The trader said he lacks the cash to buy rice from farmers, which means the farmers do not have money to buy equipment or pay workers to produce the rice.
Many of the private banks’ loans were collateralized against real estate in Yangon, where property prices have collapsed since the coup, analysts said.
Private banks in Myanmar are required to deposit a certain percentage of their customers’ money in the country’s central bank as a way of protecting savings.
Two bankers said that their banks had deposited more than is required, but were denied permission by the central bank to withdraw any surplus, leaving them short of cash to dispense to customers.
An executive at a major Burmese bank said the closure of branches in the first two months after the coup prevented a run on the banking system caused by a rush to withdraw savings.
“It was a good thing that the branches haven’t been open,” the banker said. “If the branches were open, we wouldn’t have enough cash to pay out.”
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