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Foreign reserves drop as imports rise
Foreign currency supply remains sufficient despite the higher value of imports, according to a top central bank official.
“There is no problem. At present, we have enough foreign reserves to import goods for four months,” Bank of the Lao PDR Governor Phouphet Khamphouvong told Vientiane Times last w eek.
The governor's comment comes amid concerns over short supplies of major foreign currencies such as the US dollar and Thai baht.
A number of commercial banks in Laos have tightened up foreign currency exchange. Some are advising customers wanting to buy foreign currency to exchange money at their main branches or headquarters.
Mr. Phouphet said commercial banks in Laos should be able to provide this service without difficulty, as foreign currency reserves are strong.
Under the central bank's monetary exchange policy, a person can change up to 20 million kip a day at any exchange service unit in Laos. They do not need to give a reason for the transaction, but must show an ID card.
A person or company wishing to change more than 20 million kip or the equivalent must explain why they need to pay such a debt in foreign currency.
The exchange of large amounts of money is supposed to take place only at ban k branches and headquarters.
Mr. Phouphet said all commercial banks in Laos are supposed to facilitate exchange of the kip, as this inspires confidence about the availability of foreign currency in Laos. This in turn encourages people to deposit kip in banks.
He said the central bank's relaxed money exchange policy was introduced a few years ago after it was found that problems related to unregulated money exchange resulted from a restriction in the supply of foreign currency.
“There was a concern at first about whether we would have enough money to meet demand if we made it easier for people to exchange kip,” he said. But this concern has eased as people are exchanging foreign currency as well as the kip.
Mr. Phouphet admitted that foreign reserves had dropped from the level that would normally purchase imported goods for five to six months, explaining this was the case because of the higher value of imports.
“Our foreign reserves have dropped because of the rise in imports,” he said, adding that it was not unusual to experience a drop in foreign reserves.
He said he was confident the drop in foreign reserves would not create instability in the value of the kip.
Laos mostly exports mining products, electricity, garments and agricultural products, and mostly imports consumer items.
The recent increase in imports is attributed to more fuel and vehicles coming into the country.
vientiane times
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