Friday, August 18, 2017

Central Bank in spotlight over coins

The ire of MPs over the 11.95 percent supplementary budget request from the outgoing government was directed yesterday toward the Central Bank.

While its request for K59.059 billion represents just 2.3 percent of the K2.464 trillion budget proposal, MPs said it was a prime example of government profligacy amid a stalling economy.

But Central Bank deputy governor U Soe Min defended the request, telling the Pyidaungsu Hluttaw yesterday that the additional funds sought by the Bank would help cope with inflation and ensure the smooth running of the country’s financial system.

Pyithu Hluttaw representatives Daw Khin San Hlaing from Pale township, Sagaing Region; Daw Khin Mway Lwin from Myingyan township, Mandalay Region; and Daw Tin Nwe Oo from North Dagon township, Yangon Region, zeroed in on the matter of the 10,000 commemorative K5000 coins that the bank issued for sale last month.

“We’ve found that the Central Bank has requested a supplementary grant of K59 billion and also minted coins with a face value of K5000 to commemorate the government’s first five-year term. The Pyithu Hluttaw’s Public Accounts Joint Committee has raised the question of whether this was lawful,” said Daw Khin Mway Lwin. “Was the issue of these coins really necessary when so much money is being wasted and state-owned enterprises are in trouble?”

She also asked how many had been sold, and if it was true that the coins were selling for K30,000 each.

Daw Khin San Hlaing asked if the issuance of the coins, which were not part of the national currency, was legal under the Public Funds Act. “It does not seem to be good practice that the bank should request a supplementary budget after casting 10,000 coins,” she said.

U Soe Min said new banknotes had to be printed after the government raised wages, and printing costs had also risen. He said the cost of printing bank notes and casting the coins was K36.802 billion.

“Wage increases and a broad budget deficit were driving more currency into the economy, a factor that leads to inflation. Handling inflation is the responsibility of the Central Bank. The bank also carried out a [treasury bond] auction to collect inflated currency as a way to handle inflation. We needed more cash to pay off interest on the [bonds], so requested an allotment of K16 billion,” he said.

He added that part of the additional budget request was to cover the cost of circulating the coins, which were to be priced in accordance with actual production costs. Money earned from selling the coins would go into the state’s coffers, he said.

U Soe Min said minting such commemorative coins was a common practice among international central banks, and its issuance was legal under the relevant legislation. The allocation requested by the bank would flow into government departments, he said.

North Dagon MP Daw Tin Nwe Oo warned of the risk of inflation, recalling that K10 from 50 years ago was now worth K10,000. The K5000 note had been introduced in 2009, and the K10,000 note since 2012.

She said, “A new coin can be issued only with the permission of the Financial Commission.

“But even though we already have a K5000 note, the bank issued a K5000 coin without seeking permission. Why did the Bank issue this K5000 coin? Money is a medium of exchange. If a K5000 bill were sold for K30,000, where does the extra K25,000 come from? An increase in the circulation of money will bring inflation, with consequences for internal stability.”

Translation by Zar Zar Soe and Kyawt Darli Lin