Central Bank of Myanmar requires foreign currency to be converted to Myanmar Kyat with exemptions

28 April 2022

On 3 April 2022, the Central Bank of Myanmar (“CBM”) issued a directive and a notification relating to the conversion of foreign currency income into Myanmar Kyats. Both Directive No. 4/2022 (“Directive No. 4”) and Notification No. 12/2022 (“Notification No. 12”) came into immediate effect upon their issuance.

On 5 April 2022, CBM issued Directive No. 5/2022 (“Directive No. 5”) and Directive No. 6/2022 (“Directive No. 6”) providing further information on Directive No. 4 and Notification No. 12.

Most recently, on 20 April 2022, CBM announced exemptions to the requirement to convert foreign currency as set out in Notification No. 12. 

This article sets out the key provisions of these CBM issuances.

Banks to convert foreign currency received

Directive No. 4 requires banks holding an authorised dealer licence (“AD banks”) to convert income, whether from trade or non-trade sources, received from overseas into Myanmar Kyats within one working day of the receipt of those funds. This Directive also provides that, from 4 April 2022, foreign currency can only be transferred out of Myanmar with the approval of the Foreign Exchange Management Department.

Directive No. 4 specifies that this conversion should be done at the rate of MMK1,850 to US$1 with the conversion of other foreign currencies to be made at rates prescribed by the CBM in the Directive.

Directive No. 4 also instructs AD banks to convert foreign currency in accounts opened prior to 3 April 2022 into Myanmar Kyats.

Directive No. 5/2022 clarifies that the entirety of Directive No. 4/2022 does not apply to the accounts of the Union Government or Ministries.

Foreign currency earnings to be deposited and converted

Notification No. 12 provides that foreign currency earned by Myanmar residents must be deposited in AD banks and converted into Myanmar Kyats within one working day of receipt. Directive No. 6 clarifies that Notification No. 12 applies to Myanmar residents’ incoming international transfer in foreign currency from abroad, outgoing transfer of foreign currency abroad and foreign currency held in foreign currency accounts with Myanmar banks.

Directive No. 6 also provides more information on the obligations of AD banks in relation to conversion of foreign currency, which it must complete within one business day.

No

Type of funds

Action by AD bank

1

Export proceeds

·         Transfer and deposit the foreign currency into the relevant company’s account on the date of receipt

·         Convert the foreign currency at CBM’s specified exchange rate and deposit the converted sum into the relevant company’s Myanmar Kyat account

2

Other proceeds including services

·         Transfer and deposit the foreign currency into the relevant company or individual’s foreign currency account on the date of receipt

·         Convert the foreign currency at CBM’s specified exchange rate and deposit the converted sum into the relevant company or individual’s Myanmar Kyat account

3

Inflow of funds for investment

·         Transfer and deposit funds received in foreign currency for the purposes of investment into the relevant company’s foreign currency account on the date of receipt

·         Convert the foreign currency at CBM’s specified exchange rate and deposit the converted sum into the relevant company’s Myanmar Kyat account. Funds granted an exemption by the Foreign Exchange Supervisory Committee (“FESC”) are not subject to this obligation

4

Loan received for investment

·         Verify if CBM’s permission is obtained for such offshore loan under the Foreign Exchange Management Law and the Foreign Exchange Management Regulation (“FEMR”). If such CBM permission has been obtained, to transfer and deposit funds received from such offshore loan into the relevant company’s foreign currency account on the date of receipt

·         Convert the foreign currency at CBM’s specified exchange rate and deposit the converted sum into the relevant company’s Myanmar Kyat account. Funds granted an exemption by the FESC are not subject to this obligation

5

Unilateral transfers for gifts, donations, maintenance cost, inheritances, receipts from transfer of real estate, aid or allowance (other than such aid or allowance permitted by the Union Government)

·         Verify if CBM’s permission is obtained under paragraphs 54 and 55 of FEMR.
If such CBM permission has been obtained, to transfer and deposit the foreign currency received from such unilateral transfer into the relevant company’s foreign currency account on the date of receipt

·         Convert the foreign currency at CBM’s specified exchange rate and deposit the converted sum into the relevant company’s Myanmar Kyat account


Directive No. 6 instructs that Myanmar residents seeking to transfer foreign currency out of the country for the following reasons must seek the permission of the FESC:

  • Payment for imports (including advance payments);
  • Payment for services and other costs;
  • Payment for dividends and return of capital;
  • Transfer for offshore investments;
  • Repayment for offshore loan principals and interests; and
  • Transfer for expenses as provided in paragraph 27 of the FEMR (including travel cost in connection with foreign trips, healthcare costs, educational cost and examination fees, participation in conferences and seminars, living cost of family member(s) residing abroad).

If FESC permission is obtained for the transfer of foreign currency out of Myanmar, the AD banks must sell the foreign currency to the permitted person at the exchange rate specified by CBM with service fees of MMK 1 per US$1 collected. Exceptions may be prescribed by CBM.

Exemption from foreign currency conversion requirement

On 20 April 2022, CBM issued Letter No. FE-1/69 (“CBM Letter”) announcing exemptions to the protocols set out in Notification No. 12.

The CBM Letter provides that the following are exempt from compliance with Notification No. 12:

  • Foreign direct investments carried out with the permission of the Myanmar Investment Commission;
  • Investments operating in Myanmar’s Special Economic Zones;
  • Foreign diplomats and their family members, as well as foreign staff of rank similar to diplomats employed by embassies in Myanmar from countries that have established diplomatic relations with Myanmar;
  • Staff of the United Nations and its subsidiaries employed in Myanmar, and Myanmar citizens holding a United Nations laissez-passer document;
  • Foreign staff of foreign development agencies working on aid projects in Myanmar;
  • Foreign staff of diplomatic rank from international organisations (for example, the International Committee of the Red Cross and the International Labour Organization), international non-governmental organisations and development agencies (such as the Thailand International Cooperation Agency and the Japan International Cooperation Agency); and
  • State-owned/citizen-owned international airlines.

Prior to conducting foreign currency transactions for those listed above, AD banks must obtain documentation proving that these businesses, entities and individuals fall within the exemption allowed by the CBM Letter. The AD banks are also required in this regard to carry out foreign currency transactions for those with exempted status only after completion of Know Your Customer (KYC) and Customer Due Diligence (CDD) processes.

Reference materials 

To read our articles on the CBM notifications that were issued soon after they were announced, please click on the titles below: