07/06/2022, 14.54
LAOS
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At 23 per cent, inflation could become a political crisis in Vientiane

Inflation has reached its highest level in 22 years. For months, experts have been warning that the country could end up like Sri Lanka. Higher prices are compounded by the country’s sovereign debt crisis. According to some, the economic crisis is increasingly in danger of becoming political.

Vientiane (AsiaNews/Agencies) – Inflation topped 23 per cent in Laos last month, the highest level it has been in the past 22 years, state-owned newspaper Vientiane Times reports.

The rise in the prices of fuel and basic necessities accompanied by the depreciation of the kip, the national currency, drove up the consumer price index above the 12 per cent ceiling set by the government.

In the first half of the year, the price of petrol, gas and gold jumped by 107.1 per cent, 69.4 per cent and 68.7 per cent respectively. Moreover, while the US dollar was trading at 9,300 kip in September, the exchange rate is now around 15,000 kip.

In May long queues of motorists waiting to buy fuel were the most visible sign of the economic crisis. in fact, as foreign currency gets scarcer, the government is unable to import petrol and diesel fuel needed for transportation and farm machinery.

Like in Sri Lanka, rising production costs are threatening agricultural production. In addition, the Southeast Asian country is facing a mounting sovereign debt crisis, some US .3 billion, contracted mostly to finance large infrastructure projects, including the high-speed train connecting the Laotian capital Vientiane to China.

As The Diplomat notes, the economic crisis is in danger of becoming political. Last month Prime Minister Phankham Viphavanh reappointed some members of his cabinet, adding some technocrats, while setting up a task force to deal with the economic situation.

The government followed this with a letter of credit for 200 million litres of petrol in order to cover the country’s needs for July and August and raised the national minimum wage in an attempt to support the poorest sections of the population.

Still, according to experts, such measures will not solve the structural problems of the Laotian economy, which are corruption, tax evasion and a development strategy based on infrastructure construction that has left the country heavily indebted to China.

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