While the Myanmar military regime’s battlefield losses throughout the country are grabbing headlines, the country’s dire economic crisis is further undercutting the junta’s capacity to wage war.
Myanmar’s military has suffered significant battlefield losses throughout the country since an ethnic rebel army alliance launched Operation 1027 nearly six months ago, raising questions whether the military is able to retake lost territories.
Fighting across eight distinct battle scapes, the military is unable to divide and conquer, and even its emphasis on first retaking the heartland of the ethnic majority Bamars, has faltered. In Sagaing, the junta has suffered significant setbacks and only recaptured one town. In southern Myanmar, two Mon resistance organizations agreed to work together as they prepare to go on the attack against the regime.
The junta offensive to recapture Myawaddy, the largest border crossing with Thailand is another case in point. Despite the city's strategic importance, the military's counter-offensive has stalled, with their force being reportedly ambushed and harassed.
While manpower issues have led to forced conscription, no less important is whether the regime is able to financially sustain its military operations.
Myanmar is broke, because the junta has broken the economy since its February 2021 coup.
The junta has eviscerated over a decade’s worth of economic growth. Between 2011 and 2019, Myanmar’s economy grew by an average 6% a year, making it one of the fastest growing economies in the region. Its poverty rate fell from 49% in 2005 to 25% in 2017.
While the economy has recovered from its 2021 nadir, when GDP contracted by 18%, it’s still down 12% since the coup. The World Bank’s cautious scenario for 1% growth in 2024 seems beyond reach.
Back into poverty
The military has dragged the country back into poverty through their own incompetence. Today, over 50 percent of the population of 55 million people has fallen back into poverty.
A recent United Nations Development Program report was more dire, citing field interviews that found 49.7% of respondents living on less than 76 U.S. cents a day. That number has doubled since 2017. The UNDP noted that the urban middle class has collapsed by 50% since the coup.
Inflation remains extremely high, at over 18 percent; though it reached 29% in mid-2023, according to the World Bank. Food prices have gone up threefold since the coup, with rice up from 60,000 kyat per kilogram to 180,000.
Firms, according to a World Bank survey, were operating at 56% capacity in 2023, down by 16% from 2022. That has diminished tax receipts.
Indeed, all sources of revenue, except natural gas rents, are down since the coup, according to the regime’s own data. This has been in part due to the economic conditions as well as the NUG’s active campaign of product boycotts, the establishment of alternate lotteries, and a drive to have corporations put their taxes into escrow.
Once cash cows, the two military-owned conglomerates Myanma Economic Holdings Ltd. and Myanma Economic Corporation are hemorrhaging funds. The former has since the coup failed to pay dividends to service members who are forced to invest a portion of their monthly salary.
Foreign investment, other than that from opportunistic Chinese and Thai businesses, is fleeing the country.
The once-thriving digital payments market is under intense military scrutiny, as they seek to control the flow of funds to the opposition.
Border crossings lost
The regime’s shortage of dollars has led to arbitrary currency controls, impacting importers and exporters. The kyat lost 16% of its value in the first quarter of 2024 alone, while the price of gold increased 22%.
The war has hurt the economy in another way. Myanmar-Now reports that the State Administrative Council (SAC), as the junta is formally known, only controls 11 border crossings, which has led to a sharp loss of customs duties.
The Kachin Independence Army has captured the Lweje crossing in Kachin State, leaving only the modest town of Kanpaiktee under junta control.
The Myanmar National Democratic Alliance Army holds Chinshwehaw in Shan State, where the Chinese brokered an 80-20 revenue sharing agreement between them and the junta.
Although the SAC still holds Muse, the main border crossing with China, the Three Brotherhood Alliance has surrounded the town and controls the roads to Lashio and has begun collecting taxes.
The junta still controls Tachileik in southern Shan State, as well as a number of smaller crossings in Mon and Tanintharyi States.
In western Myanmar, the Arakan Army's consolidation of power in northern Rakhine and opposition advances in Chin state mean that the junta has lost control of several of the border crossings to India and Bangladesh.
The loss of the Myawaddy, which has a population of 200,000, is an acute financial blow to the regime. With two bridges into Thailand's Mae Sot, it was the largest border crossing in the country, accounting for $4.4 billion in trade since the February 2021 coup d'etat, roughly 23% of the country's total trade.
Reuters noted a sharp decline in trade, especially exports, from April 2023 to March 2024. Bilateral trade fell by over 40 percent to $1.15 billion.
Hyperinflation threat
While junta officials are still manning the border gates, the Karen National Union and local border guards forces are in control of much of the city, and have pledged to “implement our plan to establish our administration one step at a time,” including customs.
The loss of border trade is so deleterious to the regime as their shortage of dollars – exacerbated by the U.S.-imposed sanctions on the Myanma Foreign Trade Bank and the Myanma Investment and Commerce Bank, which handled Myanmar’s dollar transactions – has forced them to prioritize trade in local currencies.
The SAC has desperately stepped up economic cooperation with any willing partners. On April 9, the government met with a Russian-led trading bloc to discuss economic cooperation, including trade, investment, direct payments and the opening of direct flights between Moscow and Yangon. Turning to the Eurasian Economic Commission is a sign of how few choices the regime has.
What is not certain right now is the degree to which the illicit economy from areas controlled by pro-junta border guards forces is ebbing. Seeking to distance himself from Naypyitaw, Col. Saw Chit Thu recently rebranded his border forces as the Karen National Army.
There is intense fighting now outside of Shwe Kokko, one of the major scam centers along the Thai border, though opposition forces have not taken the enclave.
While the MNDAA has largely cooperated with the Chinese and helped return hundreds of Chinese fugitives, many of the scam centers along the Thai border – including KK Park I and II, as well as Family Park, Gate 25, Huanya, Xingua and Dongmei – remain open.
The regime has scapegoated a number of senior-level economic officials, including its seventh-highest official, Lt. Gen. Moe Myint Tun, and his aide. But that's all they were, scapegoats, no different than the other corrupt and incompetent generals who remain.
Thus far, and defying predictions, the junta has not resorted to turning on the printing press at their banknote facility in Wazi. But as they become more cash strapped, they are likely to do just that.
On top of all the human death and misery the generals have caused in the conduct of a war that has largely targeted civilians, the threat of hyperinflation looms.
Zachary Abuza is a professor at the National War College in Washington and an adjunct at Georgetown University. The views expressed here are his own and do not reflect the position of the U.S. Department of Defense, the National War College, Georgetown University or Radio Free Asia.