Myanmar’s Military Regime Gains Financial Foothold, Fueling Conflict

Five years after seizing power in the February 1, 2021 coup, Myanmar’s military regime, now operating as the State Security and Peace Commission (SSPC), has demonstrably improved its financial standing. This strengthening of the regime’s economic position is enabling increased military action, while simultaneously restricting trade and contributing to a depressed national economy. The shift from a period of acute foreign exchange shortages to relative stability has significant implications for the ongoing conflict and the future of Myanmar.

From Forex Shortages to Relative Stability

Following the 2021 coup, the State Administration Council (SAC), the military regime’s former name, faced substantial foreign exchange (forex) shortages. This was driven by a combination of factors, including decreased foreign aid and foreign direct investment (FDI), although actual in-cash FDI inflows were less impacted than widely reported approved FDI figures. While exports initially declined in 2021, they rebounded to record highs in 2022 before falling again. Sanctions also played a role in disrupting access to foreign currency, at least initially. Crucially, a lack of public trust in the financial system, stemming from past economic crises under previous military rule, led many citizens to move their assets out of kyat and into foreign currencies, gold, and property.

Regime Strategies for Forex Control

The SAC/SSPC implemented a series of measures to both conserve existing foreign exchange reserves and access new sources. Conservation efforts included strict trade licensing, an “export first” policy, capital controls on outward remittances, reduced spending on forex-intensive areas like power supply, and a reduction in the availability of foreign exchange at the official rate of 2,100 MMK/USD for importing essential goods. Simultaneously, the regime sought to increase forex inflows by compelling migrant workers to remit 25% of their income through official channels and requiring exporters to convert their foreign earnings to kyat.

Easing of Constraints in 2025

In 2025, the regime’s forex challenges began to ease due to increased inflows and decreased demand. Remittances from migrant workers increased by 46% in fiscal year 2024/25, reaching US$2.1 billion, driven by increased pressure on agencies and a narrowing gap between official and unofficial (hundi) exchange rates. Humanitarian aid following the 2025 earthquake also contributed to increased inflows. The regime demonstrated its commitment to enforcing forex repatriation requirements, revoking the registrations of nearly 200 exporters who failed to comply.

Impact on Conflict and Economy

The improved forex situation has had a direct impact on the conflict within Myanmar. With fewer financial constraints, the SSPC has been able to increase procurement of fuel and military equipment, including drones and munitions. Notably, the regime’s drone attacks and airstrikes reached an all-time high in 2025.

But, the economic implications are mixed. Trade restrictions, while bolstering the regime’s forex position, reduce imports, hindering investment and negatively impacting consumers. Restrictions on essential imports, such as pharmaceuticals, have direct consequences for public health and well-being. The regime’s policies also affect exchange rates, potentially reducing the amount of kyat received by remittance recipients.

Positive Economic Developments

Despite the overall negative economic impact, some positive developments have emerged. In January 2026, the Central Bank of Myanmar (CBM) reduced the percentage of export proceeds that must be converted to kyat at the official rate from 25% to 15%, benefiting exporters. The CBM also facilitated access to foreign exchange for LNG purchases, leading to the return of Hong Kong-based power provider VPower in November 2025, with the potential to increase electricity supply. The improved forex situation contributed to exchange rate stability, with Myanmar’s hundi rate remaining stable in the third quarter of 2025 – a first since the coup.

Sustainability and Future Outlook

The long-term sustainability of the regime’s improved forex situation remains uncertain. Rumors of support from foreign powers or illicit funds have circulated, but remain speculative. An appreciating currency, coupled with sustained high inflation, poses challenges for export-oriented sectors, potentially impacting the livelihoods of those employed in these industries. Despite these concerns, the SAC/SSPC, and any successor regime, are likely to benefit from the improved financial situation, at least in the short to medium term.