Adverse balance of payments, decreasing tax revenues, high defense spending, and deficit financing all have led to the printing of more currency and price inflation. The official exchange rate of the kyat to dollar, however, remains unchanged. There are 4 different rates for currency exchange: the official exchange rate, the customs rate, the official market rate, and the black market rate. Officially, US$1 equals 6.73 kyats, whereas in the black market the dollar may fetch 375 or more kyats.
|Exchange rates: Burma|
|kyats per US$1|
|SOURCE: CIA World Factbook 2001 [ONLINE].|
The Asian currency crisis of 1997 added to Burma's currency woes. The sharp decline in the Thai bhat had a negative impact on the kyat. During the 1997-98 fiscal year, according to U.S. embassy estimates, the kyat lost 54 percent of its value. Between April and December 1997, the kyat declined from 167/dollar to 257/dollar. In 1997 and 1998, when the kyat fell, the government intervened to prop up the value of the kyat and took strong measures to keep foreign exchange from leaving the country. It put a monthly cap of $50,000 on remittances , cut the number of banks allowed to handle foreign exchange transactions, and placed stiff controls on trade.
The Asian economic crisis prompted foreign investors to either withhold investments or stay out of the Burmese market. Crises in the neighboring countries, Burma's principal trading partners, cost the country its export markets. The resultant ballooning of the trade deficit prompted the country to expand its money supply and draw down on foreign exchange reserves. According to the U.S. State Department Commercial Guide for 1999, the country was "virtually bankrupt."