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Fuel prices, kip depreciation drive up inflation in Lao PDR

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Vientiane residents now pay 18,640 kip ($1.63) a litre for premium grade fuel, 16,380 kip a litre for regular fuel and 14,510 kip a litre for diesel. VIENTIANE TIMES

Fuel prices, kip depreciation drive up inflation in Lao PDR

Fuel prices have increased six times in a period of just two months and 10 days, sparking greater concerns about the rising cost of living in Laos.

Senior economist and Dean of the Faculty of Economics and Business Management at the National University of Laos, Dr Phouphet Kyophilavong, told Vientiane Times that inflation will remain high if fuel prices continue to rise.

“Our country is almost entirely dependent on imported fuel. So, the rise in fuel prices will impact on transport costs and inflation in Laos,” he said.

In January, the year-on-year inflation rate in Laos jumped to 6.25 per cent, the highest figure recorded since January 2020, according to the latest report from the Lao Statistics Bureau.

The cost of goods and services was largely driven by fuel prices and the continuing depreciation of the Lao kip, because businesses are paying more to buy foreign currencies needed to import goods.

The Ministry of Industry and Commerce last week announced the sixth increase in fuel prices this year, causing petrol stations to be flooded with vehicles as motorists filled their tanks before the new rates were implemented on March 10.

Vientiane residents now pay 18,640 kip ($1.63) a litre for premium grade fuel, 16,380 kip a litre for regular fuel and 14,510 kip a litre for diesel.

The surge in oil prices triggered a heated debate among members of the public, who are increasingly concerned about the spiralling cost of consumer goods.

In January, the price of fuel and gas went up by 29.53 per cent year-on-year, forcing petrol-related businesses, including motorcycle services at the Morning Market in Vientiane, to raise prices by 10 per cent to 20 per cent.

According to the Lao Statistics Bureau, costs in the communications and transport category in January rose by 13.72 per cent year-on-year.

Oil prices on the global market jumped by as much as seven per cent to trade above $128 a barrel, according to a CNBC report on March 8. Fuel prices and inflation are interrelated since petrol is a major input of the Lao economy, with oil being used to fuel transportation and productivity.

In addition, the depreciation of the Lao kip against the US dollar and the Thai baht has made it harder for the government to curb inflation.

According to the Banque Pour Le Commerce Exterieur Lao (BCEL) exchange rates on August 18, 2018, $1 bought 8,268 kip and a dollar sold for 8,308 kip. One baht bought 249.54 kip and sold for 251.4 kip. March 10’s exchange rate saw $1 buying 11,460 kip and selling for 11,486 kip. One baht bought 354.5 kip, and sold for 357.17 kip.

As a result of the Lao kip’s depreciation, the import price index jumped by 10.49 per cent year-on-year in January, triggered by the rising prices of fuel, food seasoning, household items, vehicles and spare parts.

VIENTIANE TIMES/ASIA NEWS NETWORK

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