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Money-wise, Burma seems to operate in an alternative universe – one where there are no ATMs, no credit cards accepted, no traveler’s checks. It is truly a cash economy.

There is a dual currency system: US dollars are used for paying hotels, flights, and entrance fees and the local currency, kyat (pronounced “chat”) is used to pay for taxis, meals in non-hotel restaurants, purchases from markets, etc.

The kyat, like currencies of many small countries, is not a convertible currency. You can’t order it from your bank or buy it in other countries, and outside of Burma, it is worthless. This is also true of the VN dong, the Laos kip and the Cambodian riel. But the kyat has additional complications.

There is an “official” exchange rate of about 6 kyat to the US dollar. However, the “real” exchange rate is varies widely, in the last year ranging from about 650 to 850 kyat to the dollar. In 2009, we got 1000 kyat to the dollar. As a traveler, you exchange money on the “black market” (jewelry stores, travel agents, hotels, etc). Indeed, in the past if you asked to exchange money at the airport exchange counter, they would tell you not to exchange money there because they had to use the official exchange rate. Recently, an exchange has opened at the airport that gives reasonable rates, not as good as you would get in Yangon, but only 40-50 kyat per dollar less. It is illegal for a foreigner to exchange money at a bank.

Worldwide, you get the best exchange rates for $100 bills. The difference in exchange rates for $100 bills versus lesser denominations is more marked in Myanmar than other places I’ve been.

You will want to take $100 bills to exchange for kyat and $100 bills to pay your agent for hotels and airfares, but take a variety of smaller bills so you can pay exact amounts as you settle bills for meals and incidentals at your hotels, pay admission fees, etc. You cannot guarantee that places will have good bills to give you change.

The best exchange rates are in Yangon. In Yangon, the best rates are at Scott’s Market. The farther from Yangon you get, the lower the exchange rates will be. In Mandalay, expect rated to be perhaps 40-60 kyat per dollar less, at Inle, they are even lower, perhaps 100 kyat to the dollar less. So it makes sense to exchange what you’ll need in Yangon.

US dollars, whether to spend or exchange, must be pristine. Bills that are wrinkled or worn, with ink marks or scuffs are not acceptable and cannot be exchanged or spent in Burma. I have known people who ironed their dollars to make them acceptable. If possible, order new currency from your bank for your trip. If that is not possible, ask them to save to the best-looking bills for you.

The national bank has a policy of not accepting bills that have even the tiniest tears or are dirty or have ink on them. Thus, places that accept dollars such as hotels and travel agencies are very particular about the currency they accept, as if the central bank won’t accept a bill, it cannot be exchanged. Their only recourse is to find a visitor who will exchange an unacceptable bill for an acceptable one.

Technically, private citizens in Burma are not allowed to possess foreign currency. Even those private citizens who are allowed to accept foreign currency (such as taxi drivers from the Rangoon airport or horse cart drivers in Bagan) are often hassled by government officials as they try to exchange dollars. For small vendors, exchanging dollars is a problem. If/when they can exchange them for kyat, they may be harassed and they will not get a good rate. Vendors often ask tourists to trade them kyat for the dollars they have previously accepted. Do the vendors a favor and only use kyat when you purchase. If you have extra kyat, do trade them kyat for dollars.

Because of the sanctions placed on Burma by most of the world, Burmese companies cannot accept credit cards. You will find some places (typically high-end hotels) that will accept credit cards to pay your bill with a 5-15% surcharge, as they use Thai or Singapore companies to process the charges. No American Express cards can be accepted anywhere. 
 If you find yourself really in trouble – out of money – there are a few hotels that will advance you money by charging your credit card, but you’ll pay about a 20% premium for this. So when you figure out how much money to take to Myanmar (Burma), add a good margin of safety. It’s not like the rest of the world where you can just find an ATM if you need to replenish your money supply.

By the way, if you are headed there via Bangkok, there is an ATM airside at the Bangkok Airport that dispenses US dollars.

What about other currencies? You may be able to find people who will exchange Euro, Baht, Indian Rupees, Pounds Sterling or RMB in Yangon, but the rates won’t be as good as for US dollars.