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Myanmar’s pro-democracy leader Aung San Suu Kyi on Monday said she hoped her party’s victory in weekend by-elections was the “beginning of a new era” for the country after decades of military rule.

Official results will not be available for at least another week. But the National League for Democracy has said it had won 43 of the 44 constituencies contested in Sunday’s poll, defeating candidates of the government-backed USDP as well as other opposition groups. The claim was backed by people close to the government of president Thein Sein.

“It is not so much our triumph as a triumph of the people,” Ms Suu Kyi told cheering supporters at the NLD’s headquarters in Yangon.

“We hope that this will be the beginning of a new era, when there will be more emphasis on the role of the people in the everyday politics of our country. We hope that all other parties that took part in the elections will be in a position to cooperate with us to create a genuinely democratic atmosphere.”

The parliamentary by-elections will be a litmus test of the progress the country has made in its reform programme and could persuade the west to lift sanctions.

Outside the NLD’s dilapidated Yangon headquarters late on Sunday night, euphoric crowds danced to trademark campaign songs and cheered wildly as informal tallies were posted on a large digital sign board above the entrance. “We’ve been waiting – and dreaming – of this moment for so many years,” said one middle-aged man with a red and yellow NLD bandanna around his head.

The result will see Ms Suu Kyi and a diverse range of NLD candidates, including former political prisoners and a hip-hop artist, take their seats as MPs in the sprawling parliament buildings in the capital, Naypyidaw, in the July session.

While the final official tally could see the NLD end up with 41 or 42 seats, one government adviser told the Financial Times that the extent of the NLD victory could increase pressure on the reformist president from conservatives within his military-dominated government.

The NLD victory, while praised by the international community, is humiliating for the government and could bolster hardliners who oppose the extent of Mr Thein Sein’s reforms, they said.

International observers commended the orderly conduct and relative transparency of the April 1 poll, while diplomats indicated the European Union and the US would start moving to lift sanctions imposed on Myanmar during decades of harsh military rule.

Hillary Clinton, US secretary of state, congratulated the people of Myanmar for participating in the election, but told a press conference in Istanbul, “it is too early to know what the progress of recent months means ... there are no guarantees about what lies ahead for the people of Burma”.

Most western countries have already begun to ease some sanctions while the US is in the process of upgrading its ties to appoint an ambassador to Yangon. The EU will hold a meeting on April 23 to reconsider its sanctions policy and has already set late April as the date to open its new embassy in Yangon.

In stark contrast to the country’s national election in 2010 – widely condemned by western governments as deeply flawed – the government gave unprecedented access to about 160 international observers as well as media to visit polling stations on Sunday.

The EU and US had made the clean conduct of the April 1 poll a condition for lifting sanctions. Other benchmarks were the release of political prisoners and resolution of Myanmar’s many ethnic conflicts. With the election result coming after a series of prisoner releases and ceasefire agreements with nearly all ethnic rebel groups apart from the Kachin in the country’s north, “it is time for the west to normalise [relations]”, said one Yangon-based diplomat.

Additional reporting by Daniel Dombey in Istanbul

Move to end exchange rate discrepancies

Myanmar on Sunday launched a new exchange rate system, ending a decades-old distortion that has seen huge discrepancies between official and black market rates for the local currency, the kyat, Gwen Robinson reports.

The move to a managed float exchange rate system was set for April 1, the start of Myanmar’s fiscal year. In reality, it starts on Monday, at an initial exchange rate of about Kt800 to the dollar – the rate used for most commercial transactions and slightly above the rate offered by informal money-changers and banks at the weekend.

That contrasts with the “official” rate of close to Kt6 to the dollar – a system that has led to huge distortions in government accounts and the broader economy. Vast capital inflows in the past few years due to government asset sales and resources deals among other factors have driven the kyat up from about Kt1,100 in 2009, hitting exporters and farmers.

The new system will use rates set by the Central Bank of Myanmar based on a trial system of daily foreign exchange auctions involving 17 authorised dealer banks. The auctions are the first step towards establishing a formal interbank foreign exchange market.

Under the new system, the central bank will set the reference rate after receiving bids from banks each morning. The banks can then buy and sell the currency in a trading band up to 0.8 per cent either side of the reference rate.

The new system is the most crucial of a raft of financial reforms and will move the country towards unifying its many exchange rates. The move comes as the International Monetary Fund is in the final stages of drawing up a comprehensive financial reform plan for the country, after numerous technical missions to Myanmar. The Fund is also providing assistance and training to the central bank on the exchange rate regime and other key reforms.

Copyright The Financial Times Limited 2017. All rights reserved.

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