Because Burma hasn't paid back its debts to multilateral financial institutions—and because the US wields effective veto power over the IMF—the country is barred from receiving and new financial aid.
That shouldn't matter, however, because Burma is believed to have abundant foreign exchange reserves (thanks to its sales of gas, gems and other natural resources), which it would need if it decided to simply float the kyat, discarding a fixed exchange rate that has long since ceased to have any relation to economic reality.
Floating the kyat “would require quite literally little more than the stroke of a pen,” according to Australian economist Sean Turnell, an expert on Burma's economy at Macquarie University.
In fact, introducing a floating currency would only be a matter of making official the informal system that has long been in place in Burma, where for decades most international transactions have been based on an unofficial exchange rate determined by market forces.
If the Burmese government allowed the kyat to float, it would reduce bureaucracy, increase economic freedom and hinder those elements that use the current exchange-rate arrangements as a vehicle for corruption.
The only danger, however, is that bringing a degree of common sense to Burma's exchange rate system could create the false impression that the country's economic problems can be solved without other, more fundamental changes.
“The exchange rate issue is important, but it's far from the most serious of Burma's economic problems, which have their roots in the lack of property rights, reasonable policy making, a voracious state apparatus, etc,” said Turnell.
According to a 2008 paper by Dr. Tin Soe, a former professor and head of a department at the Rangoon Institute of Economics, Burma's economy since the early 1960s, when the country first came under military control, has been characterized by “inconsistency, instability, interruption and discontinuation, rigidity and limited scope and vision, lack of transparency, unpredictability and uncertainty, quantitative physical targets-orientation, inefficient and ineffective implementation and use and abuse of consultancy and advisory services.”
In other words, if Thein Sein really wants to make a difference, his government will have to break half a century of bad habits. Floating the kyat would be a start, but it will take much more than this to clean out the Augean stables of Burma's economy.