Myanmar to revolutionize the operation of its central bank

The government of Myanmar is ready to transform its Central Bank operation such as to empower the adjustment of its monetary conditions independently, financing the debts incurred by the government be stopped and to appoint people who are experts in the policy setting process, said news report from Dow Jones.

Deputy Director General of the financial institution's regulation and anti-money laundering department Khin Saw Oo disclosed during an interview at the central bank headquarters that she is confident that the new law on central bank will be signed by the president before the end of the current parliamentary session which concludes at the end of July.

She also said she’s not disturbed about the recent depreciation in the Myanmar kyat, which has fallen around 10% against the dollar since the start of this year, since the central bank received criticism after it unified the former official and unofficial exchange rates in April 2012 that the local currency was overvalued.

But the central bank is closely monitoring the currency and will intervene in the event of serious instability.

The present leadership structure of the central bank will be disbanded. It will comprise of nine board members; the Central Bank governor will be the chairman, three central bank executives will serve as Deputy Governors and five non-executives from other professions.

The president’s office will nominate the members of the board however the approval of the parliamentary is necessary.

Under the board, there will be four committees in charge of payment systems, financial stability, foreign exchange management and monetary policy,

With the committee on monetary policy this will be chaired by one of the deputy governors and staffed by other members of that department, while a macroeconomic forecasting department will also be established.

On the other hand the new policy makers will be drawn from within the country; the central bank has one general adviser supported by the International Monetary Fund at its Yangon branch.

A resident adviser on regulation and supervision from the IMF will be appointed.

She further added that in the month of August, the central bank will start deposit auctions which it can use to withdraw liquidity from the system and in September Myanmar's authorities plan to issue regulation for the setting up of a Treasury bill market, with the help of the IMF, the report said.

For now about 40% of the government deficit is financed by the central bank. Experts on monetary relations said that this practice should not be done since it could encourage uncontrollable inflation.

In the event that the new law is approved, the central bank will slowly reduce to zero the proportion of the deficit it finances and most likely the central bank will be able to issue its own bonds if necessary.