Kyat Slump Disrupts Thai Border Trade as Import Costs Rise
The rapid depreciation of Myanmar’s currency has disrupted border trade with Thailand, prompting some traders and money changers along the border to suspend transactions as they struggle to cope with volatile exchange rates and mounting import costs.
The currency weakened to around 680 baht per 100,000 kyats this week, down from more than 700 baht in recent weeks. The currency also fell against the U.S. dollar, with the market exchange rate rising from just above 4,700 kyats per dollar at the end of October to more than 4,900 on Wednesday. The rate was just around 4,400 kyats in early October.
The latest slump is fueling concerns over another wave of inflation in a country heavily reliant on imports from Thailand. Myanmar imports a wide range of goods from its neighbor, including electrical appliances, household products, cosmetics, construction materials and foodstuffs, making fluctuations in the baht exchange rate significant for consumers.
Market insiders attributed the kyat’s latest decline to the regime’s plan to borrow 2.1 trillion kyats from the Central Bank of Myanmar to finance a budget shortfall for fiscal year 2026-27, which ends on March 31. The regime has already sold treasury bonds worth trillions of kyats, leading to speculation that it will simply print banknotes to cover the deficit.
They also pointed to Myanmar’s continued inclusion on the Financial Action Task Force (FATF) blacklist, delays in export licensing and policy inconsistencies between ministries as factors undermining confidence in the market.
The swift depreciation of the kyat has left traders struggling to price goods and manage working capital.
“A gradual rise doesn’t create much difficulty. The problem is when rates surge rapidly,” a trader in Myawaddy told The Irrawaddy.
“If exchange rates rise further, we will need more capital to restock. Some traders have temporarily stopped trading and making payments, and are waiting to see where the market moves.”
The uncertainty has spread beyond traders. Some major money changers in Myawaddy and across the border in Thailand suspended transactions on Wednesday, opting to wait for the next day’s opening rates before resuming business, according to border exchange operators.
The volatility is not confined to the Thai border. Traders in Muse, on Shan State’s border with China, are facing similar difficulties as the kyat continues to weaken against the yuan, market sources said.
Traders warn that prolonged instability in foreign exchange markets could further squeeze trade. Importers say their profits are shrinking, but are reluctant to increase prices for fear that demand may decline further.
A trader in Myawaddy said transport costs remain a major contributor to rising prices, with expenses along trade routes increasing because of checkpoints and demands for unofficial payments.
“Price increases are caused more by transport costs than exchange rates,” he said. “Costs at checkpoints rise sharply whenever authorities announce crackdowns or tighter controls.”
Exporters also say the weaker kyat is raising shipping costs because freight charges, container fees and port services are paid in U.S. dollars. At the same time, they complain that mandatory foreign-exchange conversion rules prevent them from fully benefiting from higher market exchange rates.
Under existing regulations, exporters must convert 35 percent of their export earnings at the Central Bank’s official rate, creating a significant gap between official and market rates. The Central Bank’s official reference rate remains 2,100 kyats per dollar, while its market trading rate is about 3,660 kyats per dollar. The market rate was around 4,900 kyats on Thursday. Before the coup, the kyat traded at roughly 1,300-1,400 per U.S. dollar.
An exporter from Mon State explained that the depreciation of the kyat has sharply increased the capital required to buy export commodities such as corn and onions.
“Previously, we could buy a container of goods for 10 million kyats from local producers. Now it can require more than 15 million kyats,” he said.
Traders say prices of Thai imports, particularly electrical goods, household products, cosmetics, construction materials and food items, are already climbing as a result of the stronger baht and rising transportation costs.
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