India, Myanmar exploring trade in national currencies

New Delhi: India and Myanmar are exploring the possibility of conducting bilateral trade in their national currencies under the Asian Clearing Union (ACU) mechanism. Foreign secretary Ranjan Mathai told reporters in New Delhi that since Myanmar is a member of ACU, both sides are in talks to examine the possibility of trading in their own currencies.[caption id=“attachment_321601” align=“alignleft” width=“380” caption=“Foreign Secretary, Ranjan Mathai. Image courtesy PIB”] [/caption] Competitiveness of India’s trade with Myanmar can be significantly enhanced if India adopts a strategy whereby Myanmar accepts payment for all its exports to India in Indian rupees and the export earnings can be used to make payments for goods and services imported from India, as is the practice being followed in trade between India and Nepal and India and Bhutan, according to a FICCI survey. Myanmar is a member of Asian Clearing Union and settlement of current account transactions including trade transactions are done through ACU mechanism. The Reserve Bank of India had decided in 2004 to allow trade transactions with Myanmar to be settled in any freely convertible currency in addition to the ACU mechanism. Subsequently, the position changed whereby ACU mechanism could not be used for trade with Myanmar in ACU Dollar. Currently, border trade between India and Myanmar is done through local currencies, which is an informal arrangement. There are two border haats–one in Manipur and another in Mizoram and efforts are on to open more such haats. For trade transactions, Letter of Credit facilities, third country currencies like Euro, Singapore dollar are required, which increase transaction costs, thereby making Indian exports lose their competitive edge, says FICCI. Myanmar has in April this year introduced managed float of their currency Kyat in international foreign currency market, which saw it plunging against US Dollar. Kyat has come down from an artificially pegged rate of $1 to 7-8 Kyat to $1 to 800.30. FICCI suggested opening of US Dollar account by an Indian Bank in a bank in Singapore or Hong Kong and opening of US Dollar account by a Myanmar-based bank in an Indian Bank in India for settlement of trade transactions till such time as the ACU mechanism for US dollars resumes. PTI