Economist: Burma should “float” its chaotic currency with heavy oversight

How do you take a chaotic currency most investors avoid like the plague and make it viable?

Float it with major oversight. That's the recommendation from Nobel laureate economist Joseph Stiglitz, who spoke to the Wall Street Journal after a visit to Burma, officially titled Myanmar.

Burma's official currency, the kyat, is governed by multiple, confusing exchange rates and complicated by heavy black market activity. The current currency system, according to US State Department is "ripe for corruption."

"Companies generally unload their kyat earnings as quickly as possible," says a 2010 report. This currency mess is one of the major daunting challenges of modernizing the long-isolated nation.

Freely floating the kyat, Stiglitz told the Journal, would be "foolish."

His suggestion?

Set up a "managed float" in which the government routinely steps in. That way, as the coming wave of foreign aid and investment drive up its value, officials can step in to knock it down and keep exports competitive.