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Fuel prices to drive Lao inflation: Economist
The Lao government should keep fuel prices below 11,000 kip per litre otherwise the country will face a higher inflation threat, according to a senior economist.
“I have learnt that the government has a policy to keep fuel prices below 11,000 kip per litre, so therefore it should put that policy into practice,” Lao National Economic Research Institute Director General Dr Liber Libuapao said yesterday.
He made the comment after the Ministry of Industry and Commerce approved an increase to fuel prices in Vientiane and five provinces.
In Vientiane, the ministry now allows petrol stations to sell premium petrol for 12,230 kip per litre, up from 12,020 kip, and regular petrol for 11,000 kip per litre, up from 10,980. The price of diesel is now 9,910 kip per litre, an increase from 9,710 kip.
Dr Liber said the price of fuel has been one of the main drivers of inflation in Laos in recent years, meaning it will be difficult for the government to keep the inflation rate under control amid the rising prices of fuel in domestic and world markets.
He said the increasing prices of fuel would force most transport operators and goods producers to push up their prices, which would in turn have an adverse affect on consumers.
According to the Lao National Statistic Bureau, the Consumer Price Index (CPI) in the transport category saw a 7.85 percent increase in January compared to the same period last year, which suggests that fuel prices play an important role in inflation management.
In January, inflation saw 6.69 percent growth. Despite continual drops in the inflation rate over the past few months, the rate remains high compared to the GDP growth of Laos, which is projected to be about 8 percent this year.
Dr Liber said that the government should increase measures to stabilise the prices of fuel in order to keep inflation low, adding it is possible that fuel prices in world markets would see continual increases throughout 2012.
He said the government has the sufficient capacity to keep inflation low, explaining that 30 percent of the current fuel price structure is made up of government taxes.
He said if necessary the government could cut fuel taxes to prevent further fuel price hikes in Laos.
Dr Liber said one of the main challenges facing the Lao government is the management of food prices, another main driver of inflation in the country. In January, the CPI in the food and non-alcoholic beverage category saw a 9.12 percent increase.
He said increases to food prices were mostly due to large areas of farm land being damaged by severe floods in 2011, explaining that the government should implement concrete measures to boost productivity to ensure a sufficient supply of goods, which will help stabilise prices.
vientiane times
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