The once-formidable coalition of ethnic armed groups and pro-democracy militias in Myanmar is unravelling. After months of steady gains against the junta, the rebels are now in retreat, buckling under a fresh wave of conscripts pressed into service by General Min Aung Hlaing’s regime. The British Foreign Office, ever the voice of cautious diplomacy, has issued a call for a ceasefire. But with capital flight accelerating and the kyat in freefall, the only bottom line that matters is this: the junta’s conscription drive is a desperate gamble, not a sign of strength.
For the past year, the rebel alliance, known as the Three Brotherhoods, has seized towns and trading routes along the Chinese border, threatening to strangle the junta’s access to hard currency. But the junta’s recent mobilisation has turned the tide. Sources on the ground report that thousands of new recruits, some as young as 15, are being thrown into battle. The result is a brutal war of attrition. The rebels, already stretched thin and short of ammunition, are cracking. Their lines in northern Shan State are buckling. In Karen State, a key rebel stronghold, the junta has retaken three villages in the past week.
For the City of London, this is not a humanitarian concern but a market signal. The Myanmar kyat has lost 40% of its value against the dollar this year. Gilt yields rise when emerging market currencies collapse because it forces a flight to safety. And where does British capital flee? Into US Treasuries and German Bunds, not into a conflict zone with a crumbling insurgency. The Foreign Office’s ceasefire plea is noble but naive. A ceasefire would simply give the junta time to consolidate its gains and secure its supply lines. The rebels know this. That is why they have rejected the call.
The real story here is fiscal and monetary. The junta is printing money to pay its troops, stoking inflation that now runs at 25%. The black market for US dollars in Yangon is booming. Every day, desperate citizens swap their kyat for greenbacks, driving the currency lower. Meanwhile, the junta’s central bank has frozen foreign exchange reserves, but capital flight continues through informal channels. The rebels, too, are bleeding cash. They rely on cross-border smuggling and logging, both of which have been disrupted by the fighting. Their war chest is emptying.
What does this mean for the British investor? It means stay away from any exposure to Myanmar-linked bonds, even the junk-rated ones. The country is now rated as the world’s most unstable frontier market. The British government’s sanctions on the junta’s cronies have had a negligible effect. The sanctions merely pushed capital into the shadows. The British Foreign Office’s ceasefire call is a fig leaf for a policy that has failed to stem the conflict.
In the end, the collapse of the rebel coalition is not a victory for the junta. It is a symptom of a failed state. The junta can conscript men, but it cannot print its way to legitimacy. The currency is worthless, the economy is in ruins, and the only thing that keeps the generals in power is the gun. The British Foreign Office can urge ceasefire, but markets have already cast their vote. The bottom line: Myanmar is a broken investment, and the rubble is all that’s left.
