8 April 2022
Myanmar

Client Alert | Central Bank of Myanmar Instructions regarding Foreign Currency Conversion

The Central Bank of Myanmar (“CBM”) has issued a series of directives and instructions relating to the conversion of foreign currency in Myanmar. They are as follows:

Implementation of foreign currency conversion for all banks

Notification No. 12/2022, dated 3 April 2022, instructs all banks holding Authorised Dealer Licenses (“AD Banks”) to implement foreign currency conversions (“Notification 12/2022”). The Notification states that the foreign currency earnings of domestic residents from outside of the Union must be repatriated to the foreign currency bank accounts opened at AD Banks in Myanmar and exchanged to Myanmar Kyats within one working day, except as otherwise allowed as an exemption. Notification 12/2022 comes into effect from 3 April 2022 and revokes the previous Notification 35/2021 issued by CBM regarding the sale of export earnings within 30 days.

Under Notification 12/2022, domestic resident means:

  • individuals who have resided or have had their main establishments in the Union for a period of at least 183 days during the preceding 12 months, with the exception of diplomatic personnel servant from foreign countries and foreign civil servants who carry out similar assignments;
  • companies, organisations and offices formed legally under any domestic law and companies, organisations, offices and branches formed legally in the Union under any foreign law; and
  • diplomatic servants or other servants appointed by the Union in foreign countries.

Failure to comply with Notification 12/2022, imprisonment for a term not more than one year or fine or both in accordance with the Foreign Exchange Management Law will be imposed.

Foreign currency conversion rate

CBM Directive 4/2022, dated 3 April 2022, regarding foreign currency conversion rate (“Directive 4”) provides that commencing from 4 April 2022, foreign currency income earned outside the Union (from both trading and non-trading)  shall be converted within one working day to his/her Myanmar kyat account at the rate of MMK1,850 per USD. The conversion of other foreign currencies shall also be calculated based on the rate of MMK1,850 per USD. CBM will notify of any further rate changes.

Regarding transfers of foreign currency to outside of the Union, this can be made only with the approval of the Foreign Exchange Supervisory Committee (“FESC”). Further instructions in relation to this matter will be issued by CBM. Moreover, it was reiterated that foreign currencies of the foreign accounts prior to 3 April 2022 shall also be converted with the same rate. As at the date of publication, the conversion of existing foreign currencies held in accounts prior to 3 April 2022 has not commenced.

Exemptions of foreign currency accounts

In addition to Notification 12/2022 and Directive 4, CBM issued CBM Directive 5/2022, dated 5 April 2022, setting out exemptions under Notification 12/2022 (“Directive 5”). Exemption are given to the foreign currency accounts of the Union Ministries of the Union Government.

Procedure for conversion of the foreign currency income

Following the previous notification and directives, CBM issued CBM Directive 6/2022, dated 5 April 2022, instructing AD Banks on the procedure for conversion of the foreign currency income based on the different headings and transfer of payments to outside of the Union (“Directive 6”).

Directive 6 clarifies the procedure for the exchange foreign currency based on the different categories of income within one working day with the specified exchange rate. They are as follows:

Export incomeCredit the foreign currency account of the relevant company on the date of the receipt of the export income and conversion to Myanmar Kyat account.
Other income including servicesCredit the foreign currency account of the relevant company or individual on the date of the receipt and conversion to Myanmar Kyat account.
Funds for investmentCredit the foreign currency account of the relevant company on the date of the receipt except for foreign currency exempted by FESC and conversion to Myanmar Kyat account.
Offshore loan for investmentCredit the foreign currency account of the relevant company on the date of the receipt except for foreign currency exempted by FESC after scrutinising whether there is prior CBM approval for offshore loan and conversion to Myanmar Kyat account.
One-sided transfersCredit the foreign currency account of the relevant company on the date of the receipt except for foreign currency exempted by FESC after scrutinising whether there is prior CBM approval and conversion to Myanmar Kyat account.

Furthermore, payments to outside of the Union will also require the approval of FESC. The AD banks will sell USD to the purchasing customer at a rate specified by the CBM and collect MMK3 per USD for service charges. These payments are as follows:

  1. Payments for imports (including advance payments);
  2. Payments for services and other expenses;
  3. Payment of dividends and repatriation of invested capital;
  4. Transfers for investment abroad;
  5. Repayment of offshore loans’ principal and interest;
  6. Payments related to transfer of expenses as specified in section 27 of Foreign Exchange Management Regulations which include foreign trips, medical treatment, schooling charges and examination fees, attending conferences and workshops, living expenses for family members residing in abroad up to USD10,000 or equivalent foreign currency.

The above measures represents significant changes to the holding of foreign currencies in foreign currency accounts in Myanmar and on the transferability of foreign currency for business purposes, wherein it is anticipated to have more stringent requirements and scrutiny. We will continue to monitor and update any further developments from CBM.

If you have any questions or require any additional information, please contact Geraldine Oh, Thuzar Tin, or the ZICO Law Myanmar partner you usually deal with.

This alert is for general information only and is not a substitute for legal advice