Red Ink May Drown Junta's Legitimacy
Several weeks ago, Burmese who sought to take money from their foreign-exchange accounts at the Myanmar Foreign Trade Bank in downtown Rangoon were greeted by military intelligence officers, who queried them on the reasons for the withdrawals. The questions had an immediate effect - customers quickly left, ending what some speculated might have been the seeds of a run on savings.
The story of the stymied bank run is the latest anecdote suggesting that the Burma's shaky economy may be nearing a crisis. The evidence on the surface seems otherwise: Since the launch of economic reforms in 1988, new hotels and office buildings are springing up on city skylines, which previously had been the exclusive domain of glittering Buddhist stupas. Imported Japanese cars clog city streets, and private shops now light up towns that only a few years back turned dark at sunset.
But recent data from both government and nongovernment sources paint a far gloomier picture. Burma's merchandise exports last year were less than half of its imports. Government-monopolized exports of major commodities such as rice, teak, and hardwood have fallen by more than 50 percent since 1993. The country's debt has also jumped by 54 percent from 1993 to 1994, while its overdue debt payments have increased from $400 million to $1.5 billion over the past five years. In a nutshell, critics argue, Burma has been financing most of its growth from foreign borrowing. "Everything they buy is bought on credit, mainly from their regional trading partners," claims an economist in Rangoon.
Such "credit card" growth cannot be sustained. From April to July of this year the market value of the Burmese currency, the kyat, fell by 30 percent. In September, a Japanese firm stopped supplying oil after the government failed to pay $30 million it owed them, triggering a doubling of gasoline prices. "The oil crisis has highlighted the fact that this is a government so lacking in discipline and economic-management skills," argues one diplomat here.
Coupled with all this has been an inflation rate now running at an estimated 30 to 40 percent annually. The country's urban poor have been particularly hard-hit by the price spiral. According to one recent study of a district near Rangoon, family incomes now average about $24 per month. Many people are unhappy. "Everything has now become more and more expensive," complains a resident of Mandalay, Burma's second-largest city.
Furthermore, Burma's credit-card growth now has run down the country's total foreign exchange reserves to their lowest level since 1991. According to the Rangoon economist, the ruling junta now will have to rely on a good dry-season rice harvest this winter, lots of dollar-toting tourists, and the continued financial generosity of its regional trading partners to stave off a hard-currency crisis. "If they don't achieve this," he warns, "you're looking at the possibility of a rapid, downward spiral."
The signs aren't promising. Dry-season rice requires fertilizer, which Burma cannot afford. In addition, private tour operators in Burma claim that tourist arrivals have dried up in the last two months. Regional trading partners have not given any indication that they're ready to shut off credit, but the recent decision by the Association of Southeast Asian Nations to delay Burma's effort to join by mid-1997 may be a sign of their growing disquiet.
With SLORC's limited legitimacy resting on its economic successes, a sharp downturn could spell big trouble for the generals. Kyi Maung, one of the top leaders of the National League for Democracy, describes the current economic situation as one of the most serious threats to Burma's stability. "SLORC can't continue playing these games," he argues. "They can't continue to get away with it."