On 13 July 2022, the Central Bank of Myanmar ordered companies and retail borrowers to suspend repayment of foreign loans. According to Bloomberg, companies in Myanmar have at least US$ 1.2 billion in outstanding dollar-denominated loans. The Central Bank’s order was introduced as one of the latest measures to protect the nation’s dwindling foreign exchange reserves, in addition to the government’s previous efforts such as imposing bans on imports of cars and luxury items, tightening fuel and cooking oil imports as well as instructing local businesses to deposit and exchange foreign currency at local banks. Since the military coup in 2021, Myanmar’s currency has lost more than 60% of its value.
What is the impact on Thai businesses?
The Central Bank’s order will no doubt affect foreign companies who operate in Myanmar as they can no longer repay debts with foreign currencies. Thai businesses who operate in Myanmar and borrow in foreign currencies are no exception. To prevent defaulting on their debt repayments, Thai businesses must now seek funding sources in Thailand or other countries or alternatively, to adjust loan repayment schedules with overseas lenders. The Department of International Trade Promotion in Yangon is cooperating with commercial banks in Thailand to grant loans for Thai businesses in Myanmar. It is expected that Thai companies operating in Myanmar which do not have debts in foreign currency will experience the least impact.
In the few weeks since the announcement, the impact for Thai companies appears to have been limited. However, in the event you are experiencing difficulties and would benefit from some advice on your legal options, we remain available to assist.
Herbert Smith Freehills LLP is licensed to operate as a Qualified Foreign Law Firm in Malaysia. Where advice on Malaysian law is required, we will refer the matter to and work with licensed Malaysian law practices where necessary.