BOL asks for more support in management of foreign currencies

To ensure that foreign currency earned from various sources enters the Lao banking system and boosts foreign currency reserves, all relevant sectors must cooperate in this matter, including businesses and members of the public.

The Bank of the Lao PDR has vowed to resolve the foreign exchange issue. --Photo Laotian Times

This was the message from the Director General of the central bank’s Foreign Exchange Management Department, Mr Phetsathaphone Keovongvichith, when speaking to the Vientiane Times recently. Laos is currently suffering from a high rate of inflation and a shortage of foreign currency, but the demand for foreign currencies needed to buy imported goods has increased, he said. Laos’ inflation rate is currently among the highest in region.
In addition, the government needs foreign currency to pay the debts owed to foreign entities.
“However, we are certain that if we can channel foreign currency into the banking system and boost our foreign currency reserves, the rate of inflation will decline and no longer be the problem it is today,” Mr Phetsathaphone said.
All relevant government bodies, especially the ministries of Finance, Industry and Commerce, Natural Resources and Environment, and Information, Culture and Tourism should make sure that foreign currency earned from the sale of land is appropriate channelled, while kip should be used for the payment of food, hotels and consumer goods, he added.
He urged members of the public and business operators to exchange foreign currency only at banks, which can build up their reserves so they have more foreign currency available for purchase. 
Most developed countries put banks in charge of foreign currency exchange, which ensures proper management of foreign currencies at the correct rate of exchange and ensures undue inflation does not occur, Mr Phetsathaphone said.
The Foreign Exchange Management Department at the Bank of the Lao PDR is encouraging everyone to use kip for all transactions instead of foreign currencies such as the US dollar and Thai baht.  
“The practice of requiring payment in foreign currencies must change, although I appreciate that it will not be easy to change this longstanding custom. In addition, the government should take urgent steps in line with the Law on Foreign Exchange Management and the new Prime Minister’s Order to control the use of foreign currencies,” he said.
If every individual and every government body complied with the regulations, the situation would improve and the government would be in a much stronger position, he added.
Laos’ foreign currency reserves are currently only sufficient to buy imported goods for a period of three months. This is in sharp contrast to other countries in the region which have much larger foreign currency reserves  sufficient to buy imported goods for 8-10 months.
Mr Phetsathaphone believes that Laos’ strong potential for the export of natural resources, especially minerals, and the country’s increasing trade and investment with foreign partners, together with the Laos-China Railway, will ensure that the economy recovers and the rate of inflation will fall.

By Times Reporters
(Latest Update August 10, 2023)