The “Aung Takon” went down late Friday after leaving the town of Kyaukphyu on its way to Sittwe in western Rakhine state.
“We have got 21 dead bodies, two men and 19 women. About 26 passengers are still missing,” a police officer in Sittwe town who requested anonymity told AFP.
He added 167 people had been rescued, and that no foreigners were believed to be on board the ship.
Three navy boats and a host of private vessels were sent to scour the area after news emerged that the ferry had gone down shortly after 8.30 pm (1400 GMT).
“We suspect that the boat sank because it was overloaded with goods,” the police officer said, adding that rescuers were still searching for survivors.
Many Myanmar citizens living along the impoverished nation’s lengthy coastline and flood-prone river systems rely heavily on poorly maintained ferries for transportation.
Sinkings are not uncommon. Ten people were killed in 2010 when a ferry capsized in the Irrawaddy delta region, while 38 perished in 2008 when a ship went down in the Yway River.
In recent years Rakhine state has been the departure point for thousands of desperate Muslim Rohingya who crowd onto small and dangerously overcrowded boats to escape persecution, often aiming for Thailand and Malaysia.
Communal violence between Buddhists and Rohingyas swept through the region in 2012 leaving at least 200 dead.
Some 140,000 people, mainly Rohingya, are trapped in miserable displacement camps around Sittwe after losing their homes in the unrest.
Referred to by the government as “Bengali”, they are largely seen as illegal immigrants from Bangladesh, even if many can trace their ancestry in the country back for generations.
The Arakan Project, a rights group monitoring departures, estimated in October that some 100,000 Rohingya are thought to have fled by boat since 2012.
Many of those vessels are barely seaworthy and some are known to have never reached their destination. -AFP