Following Myanmar’s recently announced notification requiring conversion of all foreign currency transfers and balances to Myanmar kyat (MMK), the Central Bank of Myanmar (CBM) has issued additional detailed guidance to banks on how to manage transfers, outbound remittances, and various other transactions involving balances in foreign currency. The CBM also announced that the union government and ministries are exempt from the foreign currency conversion requirements.
The developments came on April 5, 2022, when the CBM issued Directive No. 5/2022, exempting these government bodies from the requirement, and Directive No. 6/2022, which provides instructions for banks licensed as authorized dealers (ADs) permitted to exchange currencies. The directive makes AD-licensed banks responsible for handling the conversion process by (1) transferring the amount in question to the concerned company’s account, (2) converting the amount to MMK at the CBM exchange rate, and (3) depositing it in an MMK-denominated account. The conversion process must be carried out within one working day of receiving the following types of funds:
- Export earnings
- Other earnings (including from services)
- Foreign currency investments (excluding foreign currency allowed by the CBM’s Foreign Currency Management Committee)
The conversion process is also required for the following two types of funds, which require the AD-licensed bank to perform additional checks:
- Loans for investment. AD-licensed banks may only proceed with the conversion process after determining that CBM approval has been obtained in accordance with section 29(a) of the Foreign Currency Management Law and Rule 48 of the Foreign Currency Management Rules.
- Unilateral transactions. AD-licensed banks may only proceed with the conversion process after determining that CBM approval has been obtained in accordance with the rules 54 and 55 of the Foreign Exchange Management Rules.
As noted in the previous notification instituting the foreign exchange requirements, outbound transfers of foreign currency by resident individuals and entities in Myanmar are to be carried out with the permission of CBM’s Foreign Exchange Supervisory Committee. Directive No. 6/2022 stipulates that this includes (but is not limited to) the following:
- Payment for imports (including advance payments)
- Payment for service fees and other expenses
- Remittance of dividends accruing from foreign investment, and return of investment capital
- Transfers for investment in foreign countries
- Making loan and interest payments to lenders in foreign countries
- Transferring expenses and fees as stipulated in rule 27 of the Foreign Exchange Management Rules
After obtaining the Foreign Exchange Supervisory Committee’s permission for an outbound transfer, AD-licensed banks are to sell foreign currency according to the CBM exchange rate, and can charge fees of MMK 3 per USD 1.