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High Spending Over Lao New Year Could Drive Up Inflation

Source: Vientiane Times

Economists are concerned that a surge in spending by households and offices over Lao New Year could drive up food prices even further and cause another uptick in inflation.

People across the country are ready to party and make the most of the Lao New Year celebrations after three years of muted festivities because of the Covid-19 pandemic.

This year’s celebrations are set to extend over many days, with the holiday running until April 18 and parties already in evidence around Vientiane.
Although the inflation rate dipped slightly to about 41 percent in March, the first drop in 18 months, the rate of inflation remained the highest in the region, according to the Lao Statistics Bureau.

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Now there are concerns that inflation could rise again in April due to the expected surge in spending by households, companies and government offices, with everyone planning celebrations during and before the five-day holiday.

Many local administrations and state agencies at the central level are already hosting long-awaited Lao New Year gatherings, but it’s important to remember that the country is still in dire financial straits, which has led to the government enacting a Prime Ministerial Decree on Economisation and Anti-Extravagant Spending.

State agencies, Party members and civil servants should lead by example and strictly observe the decree by limiting New Year spending and celebrations as much as possible even if they cannot cut them out entirely.

During a recent cabinet meeting, Prime Minister Sonexay Siphandone pledged to take steps to regulate service fees and commodity prices in markets to prevent unreasonable price hikes and minimise public suffering amid rampant inflation and slow wage growth.

Joint efforts by people from all walks of life would undeniably help to curb government spending, keep prices in check, and enable the country to recover economic stability more quickly.

Every year the government allocates a huge budget for state agencies’ spending on events to celebrate their foundation or anniversary days, even during times of economic hardship. But maybe it’s time to rethink this approach and make changes given the budget constraints all government bodies are facing, so that resources can be saved and used for national development priorities.

Despite the positive economic outlook as a result of the near full recovery of the service sector and return of foreign direct investment following the post-pandemic reopening of Laos in May last year, much remains to be done to achieve economic recovery.

There are massive debts to be serviced while it is also essential to restore confidence in the kip and prevent its further depreciation, as well as reining in inflation – just to mention a few areas of concern. On top of this, next year Laos assumes the Asean Chairmanship and will have to host many high-level meetings including the annual Asean Summit. This will require extensive preparations and place an additional burden on government spending.

Careful spending and greater attention to thrift and saving on the part of state agencies and citizens will help the government to cover its costs and be less reliant on external financing. The money saved through frugal practices could be channelled to development priorities, especially the fields of education and health care.