Govt struggling to rein in rampant inflation

The government will have to impose tough measures if it wants to cap the average inflation rate at 9 percent this year as promised, according to a senior official.
Over the past six months, the cost of goods and services has soared by 38.06 percent, affecting household incomes and people’s standard of living.
“There is a strong risk that we will not be able to achieve the target to cap inflation at 9 percent this year, because the cost of goods and services is continuing to rise,” Minister of Planning and Investment Mr Khamjane Vongphosy told the National Assembly recently.

The hike in food price drives inflation in Laos.                              --Photo Paxaxon Newspaper

The inflation rate dipped slightly to 41 percent in March, edging down further to 39.89 percent in April, 38.86 percent in May and 28.8 percent in June, down from the peak of headline inflation recorded at 41.3 percent in February. 
Depreciation of the kip is one of the main factors driving inflation because one third of the goods used to calculate price rises is imported.
In June, the hike in consumer prices was mainly driven by the food and non-alcoholic beverage category, which surged by 49.1 percent year-on-year.
This was followed by the medical care and medicines category (38.8 percent), hotel and restaurant category (35.2 percent), communications and transport category (33 percent), household goods (32.9 percent), and clothing and footwear category (25.1 percent).
Almost all types of products on sale at markets have undergone further price increases in recent months.
The price of polished sticky rice rose from 15,064 kip/kg in May to 15,381 kip/kg in June; pork from 79,627 kip/kg in May to 80,241 kip/kg in June; grade A beef from 109,847 kip/kg in May to 110,398 kip/kg in June; and farmed fish from 45,627 kip/kg in May to 46,303 kip/kg in June, according to the Lao Statistics Bureau.     
Prime Minister Dr Sonexay Siphandone told the National Assembly that tackling inflation, depreciation of the kip and public debt are among the government’s top priorities in the coming months.
The government has pledged to reduce the financial deficit and regulate foreign currencies while also promoting foreign investment and tourism.
NA members called on the government to limit the import of luxury and non-essential goods, which require large amounts of foreign currency.
Economists say it is critical for Laos to boost production levels in order to reduce the volume of imported goods, as a means to revitalise the economy in the long run.
They also advise cutting costs for investors and exporters by speeding up the approval of proposed development projects and creating incentives for investors to bring foreign currency into Laos.

By Somsack Pongkhao
 (Latest Update July 12, 2023)