The Central Bank of Myanmar still can’t carry out many basic tasks without government intervention despite the enactment of the Central Bank Law, which allowed the financial regulatory body more freedom, a member of the parliament said.
The Central Bank of Myanmar (CBM) Law was signed by the president, U Thein Sein, on July 11, 2013. The legislation secures the bank’s autonomy and clarifies its responsibilities.
U Phyo Min Thein, an MP and a member of the Parliament’s Banks and Financial Institutions Development Committee, said, “How long will it take to give [Central Bank] the authority, even though the government has said they will assert control during the transition period only?”
He said the government is can not to be solely blamed for this, as the Central Bank also needs to consider itself independent as well.
The Committee also claimed that it has been difficult to conduct surveys and gather statistics, as studies are often conducted by agencies unrelated to the government or the Central Bank. This makes it difficult to pass informed laws.
U Phyo Min Thein added that the role of Central Bank is crucial for national economic development, and if it doesn’t function well there will be issues such as inflation due to overproduction of banknotes, budget deficit, instability in prices of goods and weak currency.
“These will continue unless the Central Bank can act independently,” he said.
According to the 1952 Central Bank Law, 25 percent of the overall monetary supply had to be in foreign currency and banknote production was stopped if the production exceeded certain set limits.
U Than Lwin, former vice chairman of Central Bank, said “If overproduction of bank notes occured, the Central Bank had to stop the production and back up the currency by generating more income and taking foreign loans.”
However, that law was abolished in 1967 by the Myanmar Socialist Party and the Central Bank was put under the Ministry of Finance, so that it could be tightly controlled by the government.