LAOS With 23% inflation, Laos risks a political crisis

It is the highest number in 22 years. Experts have been warning for months that the country could go the way of Sri Lanka. The rise in prices is compounded by the sovereign debt crisis. For some, the risk is growing that the economic crisis will become a political issue.

Vientiane ( / Agencies) – Inflation in Laos exceeded 23% last month, the highest figure in 22 years. With the rise in fuel and raw material prices, accompanied by the depreciation of the kip, the local currency, the consumer price index exceeded 12%, the ceiling set by the government.

The data was released days ago by Vientiane Times. The state daily wrote that in the first half of the year the prices of gasoline, gas and gold rose 107.1%, 69.4% and 68.7% respectively. Also, while in September 2021 the exchange rate was 9,300 kips per dollar, the current exchange rate is 15,000 kips.

The most tangible sign of the economic crisis was the long lines of motorists to buy fuel in the month of May: due to the growing shortage of foreign exchange, the government cannot import the diesel and gasoline necessary for the operation of transport and machinery. agricultural. As a consequence, in Laos, just like in sri lankaagricultural production is threatened by the general increase in production costs.

Added to all this is the issue of sovereign debt, which amounts to 13.3 billion dollars and which, for the most part, was contracted to finance the construction of large infrastructure projects, including the high-speed railway linking the capital, Vientiane, with China.

As you have pointed out The Diplomat, the economic crisis runs the risk of becoming a political one. Last month, Prime Minister Phankham Viphavanh made new cabinet appointments for himself, summoning technocrats to join the executive, and formed a task force whose task will be to contain the problems caused by the economic situation.

As palliative measures, the government issued a letter of credit for 200 million liters of gasoline to cover national needs for July and August. In addition, he increased the national minimum wage in an attempt to support the poorest sectors of the population.

However, experts affirm that these are temporary measures that will not solve the structural problems of the Laotian economy, which have to do with corruption, tax evasion and a development strategy based on the construction of infrastructures that has left the country heavily indebted to China.

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