THE falling value of the US dollar against the Myanmar kyat is depleting aid and development budgets countrywide and threatening to curtail programs that reach millions of people.
Last week US$1 bought about K800, up from a June 8 low of K750 but still about 20 percent less than the average June 2010 exchange rate.
Mr Bishow Parajuli, the UN resident and humanitarian coordinator in Myanmar, said the situation affected “everyone” in the aid community.
“I think it’s happening to everybody and the issue is exactly the same for everybody,” he said, adding, “I don’t think anyone can do anything about it. I don’t know what can be done.”
Mr Srinivasa Popuri, country manager of United Nations Human Settlements Programme (UN-Habitat), said exchange rate had fallen by about 30pc in a year.
“When we plan budgets for our programs, we keep a 5pc cap to account for inflation. But now we’re seeing an increase in the value of the kyat that is up to 30pc and it is affecting our projects,” he said, adding that he is explaining the issue to donors to help them understand the situation and look for ways to mitigate the problem.
Ms Marcela Rojo, a spokesperson for the Global Fund to Fight HIV/AIDS, Tuberculosis, and Malaria, which will provide more than $100 million for programs here in 2011 and 2012, said principal recipients could apply to draw down future phases of funding to mitigate the current effects of the kyat’s appreciation.
“The Global Fund is aware of the issue relating to the depreciation of the US dollar, which is naturally beyond the Global Fund’s control,” she said.
The falling exchange rate problem is not limited to UN agencies; INGOs and NGOs are also suffering.
Mr Chris Bleers, country director of Norwegian Refugee Council (NRC), said the falling US dollar rate had rendered budgets “unrealistic”.
“When we calculated our 2011 budget proposals in the last quarter of 2010, we already saw the trend in the weakening dollar and picked a lower rate to account for a continuing decline. Now, the rate has fallen below our budgeted rate and this spells trouble. We now need stricter budget and real expenditures controls, as well as re-aligning our budgets with conservative exchange rates to adjust to the new reality.
“Our first budget of the year used a higher rate than today, so the farther it dips the greater the risk with regard to local staff salary budget lines, local procurement, operational costs and program activities,” he said.
Dr Phone Win, director of Mingalar Myanmar, said the recent currency change had hurt all NGOs.
“We receive funding in dollars but implement our projects in kyats, and donors do not change their contracts for currency fluctuations,” he said.
“According to the [funding] contracts, we can not complain or ask [donors] to have a look at the issues – such as currency fluctuations – until we sign a new contract and sometimes our contracts run for three years.”
He said beneficiaries are also hurt by the unstable currency.
“We need a stable exchange rate. If [the US dollar rate] goes down, we cannot provide beneficiaries what we are supposed to provide.
“If we receive $1 to buy five bottles of purified drinking water, then with the falling rate we’ll only be able to buy four,” he said.
However, he warned that the reverse is also problematic.
“If the exchange rate jumps to K1200 then we are expected to do more work without being paid for it. We might end up having to deliver six million bottles of water instead of five million” without additional budgeting for labour and transport, he said.
“All we want is stability.”
Daw Kalayar Moe, the director of Amara Foundation, said the currency issue also hurt relationships between organisations and donors.
“Donors contribute their money to implement projects ... [but] as a small organisation, we are not able to absorb the extra costs and we have to rework our calculations and proposals. And it’s more work for the donors too,” she said.
The aid workers who spoke with The Myanmar Times were in agreement on one point – the lower value of the dollar meant programs were likely to be scaled back.
“Unfortunately because of the strengthening of the kyat by almost 30pc the dollar brings 30pc less kyat, which means 30pc less in terms of some of the activities we’re able to do,” Mr Parajuli said.
He added that UNDP is, where possible, delaying parts of programs that incur heavy kyat expenditures and focusing on other parts of the programs.
“Our activities are ongoing but whichever activities we can postpone, we will. But if they’re seasonal activities that need to be done now, then they will not be postponed,” he said.
Mr Popuri said UN-Habitat would likely reduce its projects by 10pc, while Mr Bleers said NRC was also looking at cutbacks in the year ahead. He said the organisation would be more conservative in setting budgets in the future.
“Unless there is a quick reversal to the situation we are looking at reduced output for the year,” he said. “In the future, we will have to be sure to budget at fairly low and conservative rates. This is not good news for anyone, least of all our target beneficiaries.”
Last week US$1 bought about K800, up from a June 8 low of K750 but still about 20 percent less than the average June 2010 exchange rate.
Mr Bishow Parajuli, the UN resident and humanitarian coordinator in Myanmar, said the situation affected “everyone” in the aid community.
“I think it’s happening to everybody and the issue is exactly the same for everybody,” he said, adding, “I don’t think anyone can do anything about it. I don’t know what can be done.”
Mr Srinivasa Popuri, country manager of United Nations Human Settlements Programme (UN-Habitat), said exchange rate had fallen by about 30pc in a year.
“When we plan budgets for our programs, we keep a 5pc cap to account for inflation. But now we’re seeing an increase in the value of the kyat that is up to 30pc and it is affecting our projects,” he said, adding that he is explaining the issue to donors to help them understand the situation and look for ways to mitigate the problem.
Ms Marcela Rojo, a spokesperson for the Global Fund to Fight HIV/AIDS, Tuberculosis, and Malaria, which will provide more than $100 million for programs here in 2011 and 2012, said principal recipients could apply to draw down future phases of funding to mitigate the current effects of the kyat’s appreciation.
“The Global Fund is aware of the issue relating to the depreciation of the US dollar, which is naturally beyond the Global Fund’s control,” she said.
The falling exchange rate problem is not limited to UN agencies; INGOs and NGOs are also suffering.
Mr Chris Bleers, country director of Norwegian Refugee Council (NRC), said the falling US dollar rate had rendered budgets “unrealistic”.
“When we calculated our 2011 budget proposals in the last quarter of 2010, we already saw the trend in the weakening dollar and picked a lower rate to account for a continuing decline. Now, the rate has fallen below our budgeted rate and this spells trouble. We now need stricter budget and real expenditures controls, as well as re-aligning our budgets with conservative exchange rates to adjust to the new reality.
“Our first budget of the year used a higher rate than today, so the farther it dips the greater the risk with regard to local staff salary budget lines, local procurement, operational costs and program activities,” he said.
Dr Phone Win, director of Mingalar Myanmar, said the recent currency change had hurt all NGOs.
“We receive funding in dollars but implement our projects in kyats, and donors do not change their contracts for currency fluctuations,” he said.
“According to the [funding] contracts, we can not complain or ask [donors] to have a look at the issues – such as currency fluctuations – until we sign a new contract and sometimes our contracts run for three years.”
He said beneficiaries are also hurt by the unstable currency.
“We need a stable exchange rate. If [the US dollar rate] goes down, we cannot provide beneficiaries what we are supposed to provide.
“If we receive $1 to buy five bottles of purified drinking water, then with the falling rate we’ll only be able to buy four,” he said.
However, he warned that the reverse is also problematic.
“If the exchange rate jumps to K1200 then we are expected to do more work without being paid for it. We might end up having to deliver six million bottles of water instead of five million” without additional budgeting for labour and transport, he said.
“All we want is stability.”
Daw Kalayar Moe, the director of Amara Foundation, said the currency issue also hurt relationships between organisations and donors.
“Donors contribute their money to implement projects ... [but] as a small organisation, we are not able to absorb the extra costs and we have to rework our calculations and proposals. And it’s more work for the donors too,” she said.
The aid workers who spoke with The Myanmar Times were in agreement on one point – the lower value of the dollar meant programs were likely to be scaled back.
“Unfortunately because of the strengthening of the kyat by almost 30pc the dollar brings 30pc less kyat, which means 30pc less in terms of some of the activities we’re able to do,” Mr Parajuli said.
He added that UNDP is, where possible, delaying parts of programs that incur heavy kyat expenditures and focusing on other parts of the programs.
“Our activities are ongoing but whichever activities we can postpone, we will. But if they’re seasonal activities that need to be done now, then they will not be postponed,” he said.
Mr Popuri said UN-Habitat would likely reduce its projects by 10pc, while Mr Bleers said NRC was also looking at cutbacks in the year ahead. He said the organisation would be more conservative in setting budgets in the future.
“Unless there is a quick reversal to the situation we are looking at reduced output for the year,” he said. “In the future, we will have to be sure to budget at fairly low and conservative rates. This is not good news for anyone, least of all our target beneficiaries.”
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