Mon, 28 Nov 2022

Kip depreciation continues to harm Lao economy

Xinhua
06 Oct 2022, 15:55 GMT+10

VIENTIANE, Oct. 6 (Xinhua) -- The Lao kip fell in value by 37.4 percent against the U.S. dollar and 32.9 percent against the Thai baht in the official market from January to August 2022, according to an updated report from Asian Development Bank (ADB) website.

The continuing depreciation of the kip is linked to a supply-demand mismatch of foreign currencies, ramping up pressure on importers and driving up inflation.

The currency devaluation is having a damaging effect on the Lao economy, driving up the price of products and creating more hardship for the poor.

According to the report, the year-on-year inflation rate in August was at a 22-year high of 30 percent. The rate averaged 15.5 percent in the first eight months of 2022.

Administered prices for fuel were increased 13 times from January to September, resulting in a 90.3 percent rise in diesel prices and a 62.3 percent increase in gasoline prices.

In response, the Lao government in June increased the availability of foreign exchange for fuel importers and issued letters of credit to shore up fuel supplies.

The Lao central bank issued savings bonds worth 5 trillion kip (some 301 million U.S. dollars), the equivalent of 3 percent of money supply, to reduce excessive liquidity in the economy and shore up demand for the kip.

Laos imports more than it exports, which drives up the need for foreign currencies to buy imported goods.

In August, Laos registered a record trade deficit of 166 million U.S. dollars, up from 114 million U.S. dollars in July, according to the Lao Trade Portal.

Laos' main exports in August included mining and paper products, rubber, fertilizer, clothing, beverages, sugar and footwear, while its main imports were fuel, mechanical equipment and vehicles.

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