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Central bank proposes measures to tackle inflation
The Bank of the Lao PDR has proposed that the government provide low interest loans to food producers as a way to address high inflation.
The central bank announced the policy last week ahead of the first session of the 7th legislature of the assembly which is scheduled to open in Vientiane today.
The bank's proposal is based on the premise that the current high inflation rates are partially due to a shortage in the supply of principal food products such as vegetables, rice and meat, leading to higher prices.
The agriculture sector has been hit hard by flooding in recent years, particularly in rice farming areas in the south of the country, and also livestock deaths in Xieng Khuang province due to disease outbreaks.
The shortage of food in the domestic market has forced Laos to import more food from neighbouring countries which are also facing high inflation, meaning that Laos has been unable to counteract the effects of inflation.
The central bank says it would encourage the state-owned Agriculture Promotion Bank and Nayoby Bank to provide more loans for enterprises to stockpile rice, a move that would enable the government to stabilise prices of the grain during times of peak demand.
The Ministry of Industry and Commerce has already received funding from the government to stockpile rice during the upcoming harvest.
The central bank also says it would encourage commercial banks to provide loans for enterprises to stockpile large amounts of imported goods to secure supply for the domestic market for a period of at least three months.
The stockpile of imported goods will help the government to address the shortage in supply of goods that typically occurs in the wet season, the bank says.
The bank suggested the government stop issuing loans to new infrastructure construction projects as it believes such projects will be unable to help boost food supply in the short period of time required to address inflation.
The central bank also plans to reduce money supply and curb inflation by selling bonds to the public. The bank is expected to keep its interest rate unchanged despite many countries in the region raising rates in an attempt to rein in inflation.
Money supply saw 23 percent growth in March compared to September last year, according to a report from the central bank.
The government considers the battle against price rises to be a top priority, as the current inflation rate is now higher than GDP growth. Economists and the public have called on the sectors involved to provide accurate and up to date economic data so everyone can take part in seeking solutions to the nation's inflation woes.
vientiane times
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