By Ed Cropley

BANGKOK, Aug 18 (Reuters) - The United Nations and Myanmar have resolved a problem with distorted official exchange rates that led to U.N. losses of more than $1.5 million in the delivery of aid to survivors of Cyclone Nargis. U.N. officials said on Monday the military government had agreed to let outside donors pay local companies directly and in U.S. dollars, rather than via the official, long-winded system involving foreign exchange certificates.

"This option was always open to both vendors and the U.N. However, there was a 10 percent government transaction fee on such operations that deterred us from using it," U.N. country representative Dan Baker said.

"The government has now agreed to waive the fee for all international humanitarian agencies -- U.N., bilateral and international NGOs," he said in an email to Reuters in Bangkok.

Most local firms used by aid agencies to buy supplies such as food, fuel or construction materials had dollar bank accounts, and those that did not should be able to open them up without too much difficulty, Baker said.

The U.N. has not yet had the chance to ensure the new system works in practice -- always a big if in a country under military rule for the last 46 years -- but Baker said the government had pledged to resolve any problems that arose.

The U.N. losses stemmed from Myanmar's insistence that donors convert aid dollars into foreign exchange certificates with a notional value of $1 each. These certificates are then used to buy the local currency, the kyat.

However, the exchange rate for one certificate is around 880 kyat compared to a market rate of more than 1,100 kyat per dollar, leading to a currency conversion loss of at least 20 percent.

It came as a nasty surprise to many international and private donors, making them even more reluctant than normal to give to a country already regarded as a pariah.

The May 2 cyclone left 140,000 people dead or missing, making it one of the most devastating ever to hit Asia, although the amount of aid pledged has been only a fraction of that which followed the 2004 Indian Ocean tsunami.

Of the $482 million it appealed for, the U.N. has managed so far to raise only $200 million.

After discovering the currency problem last month, U.N. humanitarian chief John Holmes urged donors not to withhold their cash lest it increase the suffering of the 2.4 million people affected.

Holmes initially estimated U.N. losses at around $10 million, but when accountants dug into the numbers they came up with $1.56 million, officials said. (Editing by Alan Raybould)

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