Inflation will remain high through the end of 2024, making it impossible to reduce the inflation rate to a single-digit figure within this year, according to Bounleua Sinxayvoravong, the governor of the Bank of Laos (BOL).
The governor spoke at a BOL brainstorming session on 22 May in Vientiane Capital, on strategies to address the country’s persistent high inflation.
The focus of the discussion was to identify the root causes of inflation in both global and domestic markets and to explore potential solutions to mitigate its impact.
The country’s inflation rate peaked at 41.26 percent in February 2023. Although there has been a declining trend since then, the inflation rate remains in double digits, standing at 24.92 percent in April this year.
Various factors contribute to this inflationary pressure, including unstable prices of fuel, gas, and imported goods. The depreciation of the national currency, the Lao kip, against the Thai baht and the US dollar, further complicates the situation by making it difficult to maintain low prices for imported goods.
To tackle the issue, Bounluea emphasized the importance of raising public awareness about the causes of inflation and the measures being taken by the government to address it. He urged participants to ensure that the public has a broader understanding of the situation and the strategies being implemented to mitigate the effects of inflation.
Back in 2023, BOL once set a goal of reducing the inflation rate to nine percent. Efforts included bolstering the enforcement of monetary policy, channeling export income into the banking system, and harmonizing currency exchange rates with market mechanisms. However, despite all the plans set in stone, the goal of going under 10 percent has never come to fruition.
Despite promises, including Lao President Thongloun Sisoulith’s pledge to guide the economy towards greater independence and local ownership to enhance resilience, Laos’ economy still shows no sign of significant development. The country’s heavy reliance on imports for domestic consumption adds to the challenges.
The World Bank, in its latest report launched last month, noted that increased food production and switching to cheaper food options are common strategies for coping with food inflation. However, after a prolonged period of high inflation, more households are resorting to additional work or borrowing from financial institutions to make ends meet.
As Laos continues to grapple with high inflation, the collaborative efforts of the BOL, commercial banks, international organizations, and relevant offices will be crucial in devising effective solutions to stabilize the economy and alleviate the financial burden on the population.
