The Bank of Laos (BOL) has announced a hike in interest rates to tackle rising inflation. After a recent Monetary Policy Committee meeting, the BOL decided to raise the interest rate on kip deposits from 10 percent to 10.5 percent and on foreign currency deposits from 10 percent to 11 percent.
This decision comes in response to several economic pressures, including global currency fluctuations, trade deficits, and burdensome foreign debt. Despite these efforts, inflation remains high, with a rate of 26.1 percent as of July.
Phanousack Kenevongphachan, Head of the Office of the Bank of Laos, noted that the country is facing significant economic difficulties. He highlighted that high interest rates in the United States strengthen the dollar, which affects other currencies and causes unpredictable value changes. Additionally, unstable gold and fuel prices further impact economic stability.
Kenevongphachan explained that Laos’ economy is heavily influenced by global economic conditions due to an imbalance between currency supply and demand. This mismatch can lead to fluctuations in currency value and affect overall economic stability.
To combat inflation, the BOL has introduced online payment options via QR codes in collaboration with banks from Thailand and Cambodia. This initiative aims to simplify cross-border payments between Laos and neighboring countries.
The BOL has also launched the Lao Foreign Exchange (LFX) platform to facilitate foreign currency trading and promote the use of the Lao kip domestically.
Inflation in Laos has been in double digits since May 2022, peaking at 41.26 percent in February 2023, reflecting significant price increases during that period.
