Knowledge Highlights 25 July 2022
The Central Bank of Myanmar (“CBM”) has recently issued two new instructions to banks with authorised dealer licences (“AD Banks”). AD Banks are banks that have been issued a licence by CBM to deal in foreign exchange, including making offshore remittances.
Suspension of repayment of offshore loans
On 13 July 2022, CBM via Letter No. FE-1/744 (Ka) instructed AD Banks to suspend transactions relating to the repayment of the principal and interest for offshore loans by Myanmar residents.
AD Banks are further instructed to inform companies of the need to revise their repayment schedules as needed in coordination with overseas lenders.
This instruction follows a recent spate of foreign currency management directives, including one requiring all foreign currency earnings to be converted into Myanmar Kyat within a day at a mandated rate. Exemptions to compliance include companies operating in special economic zones and investments approved by the Myanmar Investment Commission. Companies with 10% or more foreign ownership were also exempted from compliance with the foreign currency conversion requirement but this has since been revoked. To read more on the revocation, please see our article “Myanmar revokes exemption for foreign-owned companies from currency conversion rule”.
Conversion of foreign currency held by Myanmar companies with up to 35% foreign ownership
On 15 July 2022, CBM issued Letter No. FE-1/754 instructing AD Banks, in accordance with a recent meeting of the Foreign Exchange Supervisory Committee, to convert foreign currency held by Myanmar companies with up to 35% foreign ownership into Myanmar Kyat. A list of affected companies was attached as a schedule to the letter.
AD Banks are also required to provide CBM with information on the amount of foreign currency held by the companies listed in the schedule.
While no specific time frame is provided for the conversion of foreign currency, the letter states that banks are to do so “as fast as [is] reasonable”.
Failure to do as instructed will attract any of the following penalties as set out in section 35 of the Foreign Exchange Management Law:
- Limiting operations
- Permanent or temporary discharge from duty of the responsible officer or staff
- Withdrawal of the authorised dealer license
Our articles on the foreign currency developments in Myanmar are listed below:
- Myanmar revokes exemption for foreign-owned companies from currency conversion rule (21 July 2022)
- Central Bank of Myanmar stipulates only Myanmar Kyat to be used in domestic payments (13 June 2022)
- Myanmar establishes Foreign Exchange Supervisory Committee to oversee use of foreign currency (1 June 2022)
- Central Bank of Myanmar exempts exporters and importers under the Thai-Myanmar Border Trade and China-Myanmar Border Trade programs from foreign currency conversion requirements (10 May 2022)
- Central Bank of Myanmar announces exemptions to foreign currency conversion mandate (22 April 2022)
- Central Bank of Myanmar clarifies obligations relating to foreign currency conversion (8 April 2022)
- Central Bank of Myanmar requires foreign currency to be converted into Myanmar Kyat (5 April 2022)