Following the positive response to the recent Central Bank of Myanmar (CBM) announcement on the exemption of certain foreign direct investment (FDI) projects from the foreign currency conversion requirements, the CBM issued a further exemption on April 26, 2022, for exporters and importers conducting trade at the China-Myanmar or Thailand-Myanmar border.
The CBM’s directive (No. 7/2022) extends the currency conversion (THB-MMK or CNY-MMK) deadline to one month, meaning that foreign currency obtained from border trade with Thailand or China no longer has to be converted into Myanmar kyat (MMK) within one day.
After export earnings flow into an exporter’s account at an AD bank (i.e., a bank licensed to deal in foreign currency), the exporter can use the foreign currency as desired or sell it to the bank at the official exchange rate within one month. After one month, any unused balance remaining will be sold to the bank.
Hence, banks are authorized to directly transact in the foreign currency (i.e., CNY-MMK or THB-MMK) of exporters and importers conducting border trade at the China-Myanmar and Thailand-Myanmar borders. Designated banks may carry out foreign currency settlement for imports without seeking approval from the Foreign Exchange Supervisory Committee. Export earnings, on the other hand, are to be scrutinized by AD banks to ensure that these earnings are deposited into the relevant exporter’s bank account in Myanmar in compliance with stipulations under the Foreign Exchange Management Law and its related regulations.
Foreign currency transactions conducted under the China-Myanmar and Thailand-Myanmar border trade programs must be reported to the Foreign Exchange Management Department via the Border Trade Module of the department’s electronic reporting system.
The day after issuing the above directive, the CBM issued a separate press release warning relevant parties to strictly comply with the Foreign Exchange Management Law and its related regulations. In particular, holders of a foreign currency trading license (AD banks) must ensure that exporters’ accounts receive their export earnings within three months of the actual shipment of the goods; similarly, exporters must deposit their export earnings into their bank account within three months of shipment. Failure to do so may be punished under the Foreign Exchange Management Law by a fine, imprisonment for up to one year, or both.
For more details on these foreign exchange developments, or on any aspect of financial regulations in Myanmar, please contact Tilleke & Gibbins at [email protected].