The military junta that rules Burma has changed its currency conversion rules, resulting in the loss of millions of dollars in humanitarian aid intended for victims of Cyclone Nargis, according to reports.
Between May and July, the junta sharply devalued the foreign exchange credits, or FECs, used by international agencies working in the country.
As a result of the devaluation, financial aid from the United Nations and other organizations loses roughly 20 percent of its value before finally being delivered to the Burmese street, a situation that one U.N. official described as “odd.”
FECs were established under decades-old regulations intended to keep overseas currency out of the black market, and are the only acceptable currency for local purchases by international organizations, reports the Bangkok Post.
Speaking anonymously to Mizzima, a source in the “military establishment” said that the while the one U.S. dollar trades for 1180 Myanmar kyat on the street, the junta has valued FECs at just 880 kyat, bringing in a profit of 200 to 300 kyat for every dollar traded.
John Holmes, a U.N. humanitarian officer, acknowledged a “significant problem” in the exchange process and an estimated loss of $10 million of aid money over time.
The exchange from dollars to FECs must occur at government banks, although some officials said the U.N. could also use direct bank transfers to pay for humanitarian goods and would not be obliged to convert funds to FECs.
According to Mizzima, however, a principal bank used by aid agencies told reporters that they are continuing to give FECs to customers withdrawing funds from foreign-based direct transfers.
“We treat the FEC as equivalent to the US dollar and give customers the same amount. But we deduct 10 percent from the amount as tax,” said a bank official, wishing to speak anonymously.
Bangkok Post, August 2008
“U.N. admits loss of about 1.56 million dollars of cyclone aid in Burma”
Mizzima, August 14, 2008
“U.N. relief chief admits to ‘loss’ of aid money in exchange duplicity”
Mizzima, July 25, 2008