The United Nations lost at least $10 million in cyclone relief for the battered country of Burma because it conformed to the ruling junta's distorted official exchange rate, according to the U.N.'s top humanitarian official.
"Clearly this is a significant problem," said John Holmes, U.N. undersecretary general for humanitarian affairs, who called the losses "unacceptable" and said he raised the issue with the leaders of Burma, also called Myanmar, during a recent trip.
"Presumably the government is benefiting somehow," Holmes said.
Before dollars can be converted, Burma requires the purchase of Foreign Exchange Certificates valued at $1 each. These then can be changed into Burmese currency, the kyat, but at a great loss: The government artificially deflates the certificates' worth, resulting in losses ranging from 10 percent to 25 percent in each exchange.
According to Holmes, about one-third of the $200 million spent by U.N. agencies in Burma went toward local products and services, requiring the exchange certificates. Holmes estimated an average loss of 15 percent per exchange, accounting for the $10 million lost.
The U.N. announcement came just a day before the U.S. government on Tuesday enacted new sanctions against the Burmese military regime.
"We are tightening financial sanctions against Burma's repressive junta and the companies that finance it," said Adam J. Szubin, director of the Department of the Treasury’s Office of Foreign Assets Control, which enforces the sanctions.
"The regime's refusal to protect and allow relief to reach the Burmese people as Cyclone Nargis devastated their country is but another example of the regime's heartless neglect of its people," he said.
The Burmese junta was heavily criticized for refusing vital aid in the days and weeks following the cyclone, which killed an estimated 140,000 people.
Holmes said the U.N. raised an additional $200 million in cyclone aid as part of a renewed campaign for relief in Burma. The U.N. did not mention the losses in its new appeal, which it launched July 10.
"Perhaps we were a bit slow to recognize — because the spread suddenly widened in June — how big a problem this was going to become for us," said Holmes. "We have recognized it and are taking it up with the government."
Yet an internal U.N. document dated June 26, two weeks before it began its fundraising campaign, it made note of the "very serious 20% loss on foreign exchange."
Click here to see the U.N.'s "Note for the Record" on the foreign exchange.
U.S. Ambassador to the U.N. Zalmay Khalilzad said Tuesday that the U.S. mission was "looking further into the Myanmar government's diversion of aid," according to the Inner City Press, a watchdog group that monitors the U.N.
Khalilzad called for Burma's currency regulations to be "eliminated."
While Holmes downplayed the amount of money the Burmese junta may have received from the extortive exchanges, he added that there was "no room for any kind of complacency. There is still a lot to do to make this operation a lasting success."