How Myanmar’s Central Bank Facilitates the Junta’s Oppression

Over the three years since Myanmar’s military overthrew the county’s elected government, the Central Bank of Myanmar (CBM) has emerged as a critical component of the junta’s apparatus of public oppression. It is the principal actor providing the junta — the self-styled State Administrative Council, or the SAC — with the financial resources to wage its wars, and it is the primary instrument via which the junta seeks to thwart international sanctions.

Sanctioning the CBM, limiting its ability to fund the SAC and to deflect international action against the regime, should be a priority. As a recent report of the U.N. Special Rapporteur on Myanmar demonstrates, sanctions on Myanmar’s banks have proved effective in reducing the SAC’s ability to finance arms purchases, but they have also led to funding diversion, and the specter of a constant game of whack-a-mole against individual banks. Sanctioning the CBM would effectively embargo the entire banking system, limiting the resources the SAC employs to oppress the Myanmar people.

The CBM’s Role

1. The Junta’s Domestic Financier

The junta’s profound mismanagement of Myanmar’s economy has led them to rely overwhelmingly on the CBM to fund their wars. Ballooning budget deficits fueled by collapsing tax revenues and rising military spending can only be financed by borrowing from the Central Bank. Today, over 70 percent of Myanmar’s budget deficit is “funded” this way.

Most central banks around the world control the printing presses for currency notes. Except in the direst of circumstances, though, money is no longer physically printed for the purposes of state funding.

The need for the CBM to print money for the SAC regime is now primarily motivated by state financing considerations. While the precise magnitude of this practice is difficult to measure, the testimony of very senior officials at the CBM and at Myanmar’s finance ministry indicates that it is substantial, and a shadow (off the books) currency print run roughly matches the notes officially on issue. The output of CBM note issue, which circulates initially through military personnel, is limited only by the wear and tear of printing plates and the supply of note-quality paper. The withdrawal two years ago of a German firm supplying the latter has meant this consideration has at times been acute — and a distinct vulnerability of the junta.

This unbounded expansion of state money has caused both high inflation (nearly 30% in 2024) and monetary instability. With the kyat, Myanmar’s currency, now worth less than a third of its value at the time of the coup, it has ceased to be a means of exchange for many goods and services in Myanmar today and has become an unreliable unit of account and a failed store of value.      

In addition to funding the SAC directly, the CBM also directs Myanmar’s financial sector in supporting the military. Since 2021, the country’s private banks have been effectively forced by the CBM to buy just over 10 trillion kyat of SAC bonds (worth roughly a third of banks’ pre-coup lending), according to the author’s calculation. Myanmar’s state-owned banks have purchased a further 3 trillion kyat across the same period. Bank funding for Myanmar’s military now exceeds the sector’s aggregate lending to all other borrowers. The CBM and the commercial banks it supervises form the core of the country’s military-financial complex.  

2. The Junta’s Source of Foreign Exchange

In collaboration with the junta’s Exchange Supervisory Committee (SESC), the CBM has been the main vehicle for Myanmar’s military to secure the foreign exchange it needs to buy sophisticated weaponry abroad, such as the aircraft and bombs that represent the SAC’s primary advantage over the resistance movement.

But foreign exchange is scarce in Myanmar. The SAC has run down the country’s reserves to about $3.5 billion, little more than half of that available in 2020. Since 2021, it has bent all policy arms to secure as much foreign exchange as possible. Indeed, with few other initiatives on the table, foreign exchange procurement represents the totality of economic policy making under the SAC regime. The author counts a dozen CBM notifications, directives and other instructions in this area since the coup. Illustrative measures introduced by the SAC to this end include:

• Forced conversion of foreign currency accounts into kyatat an arbitrary exchange rate favorable to the junta;
• Forced conversion of export and other earnings by Myanmar firms into kyat at a rate favorable to the junta;
• Forced conversion of worker remittances into kyat, and extra taxation of these incomes;
• The creation of multiple exchange rates, applied to counterparties according to their use in funding regime priorities;
• The cancellation of foreign exchange-dealer licenses to all but a few junta-aligned core enterprises and the mass arrest of other currency traders;
• Arbitrary restrictions on foreign investors with operations in Myanmar in making dividend and other payments abroad; and
• An instruction to Myanmar firms to suspend interest and principal repayments on approved loans made by foreign lenders, effectively a state-directed order to default.

3. Facilitating the Junta’s Sanctions Evasion by SAC Junta

In the wake of atrocities committed by the SAC, an array of countries — with the United States in the lead — have imposed sanctions on Myanmar’s military, its leaders and institutions. In response, the CBM has issued various notifications aimed to move Myanmar’s trade and international payments away from the U.S. dollar to the Chinese RMB (their preferred choice), Thai baht, or Russian ruble, among others. These efforts are not especially effective, because the junta’s “friends” insist on being paid in hard currency and, in the case of the Russians, in gold, but they nonetheless symbolize the SAC’s hostility toward the democratic world.

4. A Vehicle for the Junta’s Surveillance and Repression

The CBM has become a key vehicle through which the SAC uses “mobile money” and other forms of financial technology, or fintech, to track down and punish resistance to their rule. Once seen as an example of how fintech could be used in a country like Myanmar to drive economic growth and financial inclusion, the CBM has converted mobile money into a means of state surveillance and coercion through closure of accounts and seizure of assets from some 18,000 accounts of people deemed to be resisting military rule.

All banks, mobile wallet firms and telecommunications companies are compelled by the CBM to participate in near real-time monitoring, using “know your customer” rules originally designed to police money laundering. All accounts are required to link with a registered sim card, national ID and other identifiers, making Myanmar’s mobile money sector an essential part of the junta’s surveillance structure and war on the public.

5. A Collaborator in the Junta’s Criminality

While the SAC applies fintech assiduously to oppress its political adversaries, it does nothing about the criminal use of fintech. The CBM has effectively abandoned past efforts to decouple the financial system from the country’s illicit economy. Neglect and indifference is part of the story here, but complicity in new forms of cyber-crime (largely targeting non-Myanmar nationals) is also key to the change. As a consequence, the world’s lead agency in anti-money laundering and counter terrorist financing, the Financial Action Taskforce, has now placed Myanmar on its “black-list,” accompanied only by Iran and North Korea.

Form follows function at the CBM, so it is not surprising to see that the institution has morphed into a creature of the military in its leadership and staffing. Retired generals now occupy the three deputy governor positions of the CBM, while a rash of lieutenant colonels now sit as policy and operational section heads. A similar situation pertains at other state-owned banks, the largest of which (Myanmar Economic Bank) is similarly run by majors and captains at multiple levels.

Sanctioning the CBM

The Central Bank of Myanmar is a vital component of the junta’s war machine. It is a vehicle that funds atrocities and helps keep those perpetrating them free from consequence. It is enabling misrule and the abuse of human rights, while funding the defiance of international norms. It is an accomplice in criminality.

Just as the central banks of Russia, Iran and Afghanistan have been sanctioned in recent years, so should the CBM. By freezing the assets of the CBM held at the New York Federal Reserve following the coup in February 2021, the U.S. has already done much of the heavy lifting needed — albeit without much appreciation. The time has come to extend this to a formal sanction on the CBM, and for other countries to join the U.S. in sanctioning the central bank.

Some may argue that sanctions on the Central Bank would harm ordinary citizens. In reality, the SAC already wields the CBM to harm ordinary people, and the only way to economic stabilization is removal of the incompetent and brutal Myanmar military from power. Although sanctions will not themselves bring about change in Myanmar, they will constitute an alliance with the many who today are bringing the return of Myanmar freedom ever closer.

Sean Turnell is a senior fellow at the Lowy Institute, Sydney, and was a former senior economic adviser to Myanmar’s civilian government, 2016-2021. Following Myanmar’s military coup, he was imprisoned alongside Daw Aung San Suu Kyi and other members of her government. He was released in November 2022.