Source: Vientiane Times
Dragging inflation, which was recorded at 39.89 percent in April, down to an average of single digit as targeted for this year, is the greatest challenge, a policy marker of Laos’ central bank has said.
Although the central bank, the Bank of the Lao PDR (BOL), has increased interest rates three times, issued multibillion-worth bonds, and increased reserve ratios to cope with the high inflation, the inflation just dipped only slightly and remains high.
The inflation slightly dropped from the record high of 41.3 percent in February to 41 percent in March and 39.89 percent in April.
The average inflation over the first four months of this year remained at 40 percent. Last year’s average stood at 22.9 percent.
The National Assembly has approved an ambitious target of dragging inflation down to an average of nine percent this year.
“Dragging the inflation down to one digit is the greatest challenge,” the Director General of the Monetary Policy Department of BOL, Soulysak Thamnuvong, was quoted as saying by Pasaxon newspaper.
The big challenge remains despite the central bank employing the key tools to cope with the high inflation.
The bank has increased the interest rate three times from 3 percent to 3.1 percent to 6.5 percent and 7.5 percent.
“This has signaled commercial banks to increase interest rates,” Mr. Soulysak said.
It has also increased reserve ratios from 5 percent to 5.5 percent for the kip and from 5 percent to 8 percent for foreign currencies.
In addition, the bank, since last year, has issued bonds amounting to more than 8 trillion kip. It recently announced it will soon start selling savings bonds worth up to 2 trillion kip aiming to stabilize the value of the kip.
“Currently, we are following the inflation or exchange rate to see how they fluctuate,” the director general said, adding that further consideration regarding issuing bonds might be made accordingly.
Laos’s slight decline in inflation comes amid dipping global inflation after central banks raised interest rates, reflected in a sharp reversal in energy and food prices. But core inflation, excluding the volatile energy and food components, has not yet peaked in many countries.