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Burma Imposes Banking Restrictions as Withdrawals Threaten Crisis - 2003-02-18

Burma's central bank has banned money transfers and limited bank withdrawals after bank runs threatened to create a financial crisis. The central bank's intervention indicates the government will tighten control over the fragile economy.

Burma's new banking restrictions came after almost three weeks of a run on deposits. The controls cover most money transfers at 20 banks, including transfers through credit cards and automatic teller machines.

Western diplomats in Rangoon reported long lines of people outside banks Tuesday as panicked customers sought to withdraw their savings. The banks were closing their doors early to stem the outflow of funds.

Rumors have persisted for days that the banking system was in trouble. Some government officials accuse what they call "destructive elements" - a euphemism for the pro-democracy opposition - of being behind the rumors.

Burma's economy ranks as one of the world's poorest after 40 years of economic mismanagement since the military took power in 1962.

Chaiyachoke Chulasiriawong, a politics professor at Thailand's Chulalongkorn University, said the latest developments indicate Burma's economy is sliding into crisis. "I believe right now with the incidents with the banks - I'm quite sure the economic downturn will go even deeper. That is of course very bad for the country and for the people as a whole," he said.

Professor Chaiyachoke expects the military to take even tighter control over the economy now. "I am quite sure the military will also tighten its rule on the country, merely for the reason that the economy is bad so that's why [Burma's military leaders] have to tighten their rule, so they can improve the economy," he said.

The problem has been building for some time. Diplomats say that recently the finance minister was ousted, and the government began investigating the management of the ministry.

"Burma has been facing an economic crisis and skyrocketing prices and people have been dealing with the daily hardship," said Aung Zaw, editor of the Irawaddy newspaper, a Burmese opposition paper.

After a brief period of economic liberalization in the mid-1990s, the military once again resorted to tight export and trade controls.