The BGA Myanmar Team led by Managing Director Zaw Oo wrote an update to clients on Myanmar’s fuel shortages stemming from recent import restrictions and the additional pressure it places on the country’s economic challenges.

Context

  • Despite the State Administrative Council’s (SAC) efforts to manage rising inflation, a drop in exports, food insecurity and banking panics, its twin policies of a fixed exchange rate and foreign exchange control — adopted in early April — have failed to remedy the country’s economic challenges.
  • The SAC’s introduction of new standard procedures for fuel imports in late April has exacerbated the country’s fuel shortages. Fuel prices increased 25 percent in July, leading to rising transport and electricity costs and additional pressure on the economy.

Significance

  • Myanmar’s economy showed signs of a slow recovery in the first quarter of this year, when the country imported $1.3 billion worth of petroleum products. However, this has worsened the country’s balance of payments, forcing the central bank to impose foreign exchange control measures that have since slowed the volume of fuel imports entering the country.
  • The effects of the fuel shortage and soaring prices have been felt across all sectors, most notably in transport and logistics, which constitute over 60 percent of Myanmar’s oil demand. Consequently, increased transport costs have driven price inflation to double-digit rates. The rising prices of basic consumer goods and food products are of particular concern.

Implications

  • Companies should look to bolster their resilience to external shocks and prepare to implement contingency plans as Myanmar verges on the brink of an economic crisis.
  • The increase in global oil prices has compounded Myanmar’s fuel shortages and could have significant knock-on effects on businesses as cash, fuel and food become increasingly scarce.

BGA will continue to keep you updated on developments in Myanmar as they occur. If you have any comments or questions, please contact BGA Myanmar Managing Director Zaw Oo at zaw.oo@bowergroupasia.com.

A small ginko leaf

Senior Advisor

Zaw Oo has a proven track record working with government, civil society and academia across Southeast Asia. He has been instrumental in turning around projects under complex regulatory and policy environments and finding new opportunities for businesses in Myanmar. His work has led to substantial policy changes and mobilized growth for the public and private sectors. Zaw Oo is one of the most respected economists in Myanmar and regularly provides critical insights and seasoned advice to key stakeholders. Prior to joining BGA, he was a senior executive of a think-tank and an advisory service, offering research and analytical services on ... Read More