YANGON: "How much do you want?" the old lady asks, pulling out a wad of notes. Despite a soaring currency that has led Myanmar to call in the IMF, Yangon's illegal money changers are not short of customers.
The woman, who conducts her business down a back alley in Myanmar's main city, sometimes changes her rate for the dollar against the kyat several times a day based on the gold price, her best indicator of the greenback's value.
While the kyat is not your average safe haven amid the global financial turmoil, its value has risen sharply in recent years, dealing another blow to the authoritarian country's crumbling economy, particularly for exporters.
"Almost every sector of our economy is suffering from the appreciation of the kyat," said Khin Maung Nyo, an independent economist in Yangon, the former capital and main business hub.
Experts say possible reasons for the currency's strength are the general weakness of the dollar, booming exports of gas and other resources, weak import demand, more foreign visitors and rising investment inflows.
While a stronger currency is not all bad news, because it can make imports cheaper, few ordinary Burmese can afford to buy foreign goods in any case, with rampant inflation making it increasingly hard for most to scrape by.
The tourist industry, people who earn dollars working for embassies and foreign firms as well as families who rely on remittances from relatives working overseas have been hit particularly hard by the strong kyat.
The new civilian government has invited a team from the International Monetary Fund to visit the country formerly known as Burma next month to offer advice on reforming the forex market and unifying its multiple rates.
The unusual request by a regime which regards international institutions with suspicion is seen an indication of the gravity of the currency market disarray and a tentative sign it is warming to modern economic reforms.
Myanmar has a highly complex exchange rate regime, with official, semi-official and unofficial rates, as well as Foreign Exchange Certificates. Holding dollars in cash without permission is illegal for ordinary Burmese.
The official government rate -- which is widely ignored -- is fixed at around just six kyat per dollar.
In stark contrast the rate on the black market stood at about 800 per dollar this week, although that is down from about 1,300 in 2007.
"During General Than Shwe's era, many of us encouraged him to unify the exchange rates," said Khin Maung Nyo, referring to the former junta boss who officially retired in March.
"But according to people close to him he did not like to make any changes because he did not want to be recorded as the person who depreciated the Myanmar kyat. So the problem was postponed again and again."
The rates gap is the result of "disastrous economic policies across five decades" which caused a divergence between the formal and informal economies, said Sean Turnell, a Myanmar economic expert at Macquarie University in Sydney.
Some see the multiple-rate system as a way for the regime to funnel revenues from natural gas sales into secret accounts by recording payments at six kyat per dollar and then exchanging them at the much higher informal rate.
"As to where this money is, no one can be sure -- but it has ended up as the vehicle for unusually large military spending, and for things like the new capital city, Naypyidaw," Turnell said.
Unifying the rates should "greatly inhibit the ability of anyone in government to hide the export earnings of Burma's state owned enterprises," he added.
An economic adviser to the new President Thein Sein told a government-organised economic forum last month the currency problem could "serve as a wake-up call" that spurs broader economic reform process.
U Myint, an associate of pro-democracy leader Aung San Suu Kyi who was appointed to the post in April, said it was "essential" to unify Myanmar's multiple exchange rates.
But it is unclear whether such a move would ease the upward pressure on the local currency.
U Myint suggested the government could also buy dollars in the domestic market, liberalise export and import license requirements and lower official interest rates to curb investment inflows so as to rein in the kyat.
In recent days the currency has stabilised somewhat, after the government announced plans to allow increased imports of cars, in an apparent bid to put the brakes on the currency's rapid ascent by boosting demand for dollars.
There are also reports the authorities will allow some private banks to open foreign exchange counters in a first step towards currency liberalisation -- something that does not scare the elderly money changer.
"I'm not worried about my business," she said.
Copyright AFP (Agence France-Presse), 2011
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