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UN, Myanmar resolve aid currency problem

* World body’s envoy in country amid waning hopes for reform

BANGKOK: The United Nations and Myanmar have resolved a problem with distorted official exchange rates that led to UN losses of more than $1.5 million in the delivery of aid to survivors of Cyclone Nargis.

UN officials said on Monday the military government had agreed to let outside donors pay local companies directly and in US dollars, rather than via the official, long-winded system involving foreign exchange certificates. “This option was always open to both vendors and the UN, however, there was a 10 percent government transaction fee on such operations that deterred us from using it,” UN country representative Dan Baker said. “The government has now agreed to waive the fee for all international humanitarian agencies - UN, bilateral and international NGOs,” he said in an email to Reuters in Bangkok. Most local firms used by aid agencies to buy supplies such as food, fuel or construction materials had dollar bank accounts, and those that did not should be able to open them up without too much difficulty, Baker said.

The UN has not yet had the chance to ensure the new system works in practice - always a big if in a country under military rule for the last 46 years - but Baker said the government had pledged to resolve any problems that arose. The UN losses stemmed from Myanmar’s insistence that donors convert aid dollars into foreign exchange certificates with a notional value of $1 each. These certificates are then used to buy the local currency, the kyat.

However, the exchange rate for one certificate is around 880 kyat compared to a market rate of more than 1,100 kyat per dollar, leading to a currency conversion loss of at least 20 percent.

Meanwhile, United Nations special envoy Ibrahim Gambari arrived in military-ruled Myanmar on Monday for five days of talks to try to kick-start negotiations between the junta and detained opposition leader Aung San Suu Kyi. With little to show from his previous five missions to the former Burma, hopes of a breakthrough on Gambari’s sixth visit are low. reuters

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