The Bank of the Lao PDR has called out currency manipulators and blamed the importation of unnecessary luxury items as reasons for the current financial crisis.
Governor of the Bank of Lao PDR (BOL), Mr. Sonexay Sitphaxay, said in a press conference yesterday that Covid-19 has had a big impact on international currencies, with a strong United States dollar contributing to global inflation and volatility in oil prices.
Mr. Sonexay said that Lao people continue to import frivolous luxury items, while illegal exchange businesses have driven up shadow exchange rates.
In an attempt to reign in the plummeting local currency, the Bank of the Lao PDR will try to implement several new measures.
It will use fiscal policy tools such as adjusting interest rates and fixed deposit rates, as well as ensuring the issuance of bonds remain at an acceptable level.
Meanwhile, a crackdown on currency exchange businesses will be carried out. Those who provide exchange rates or deal in currencies in violation of regulations will have their license suspended or revoked.
The BOL Governor suggested commercial banks should be held more accountable for their contributions to foreign currency management, while the Bank of the Lao PDR will continue to take steps to bring more foreign currency into the banking system.
Traders in border areas should be encouraged to begin using local currency in place of foreign currencies such as Vietnamese dong or Chinese yuan, according to a proposal by the Bank of Laos.
At the same time, the bank recognizes the need to develop strategies and improve legislation related to foreign debt management, particularly debt held by investors and the domestic private sector, to prevent the creation of unsustainable foreign debt.