Laos’ year-on-year inflation rate jumped to 7.3 per cent last month, the highest figure recorded in the Southeast Asian country since January 2016.

The surge in consumer prices has been driven by the spiralling cost of fuel and other imported products due to the continuing depreciation of the kip, according to the latest report from the Lao Statistics Bureau.

The demand for foreign currencies, notably the US dollar and Thai baht, remains high as businesses must use these currencies to import goods.

Consumer prices surged more than expected over the past seven months, driven by both internal and external factors.

According to the Lao Statistics Bureau (LSB), the external factors impacting the costs of goods and services are mostly linked to the Covid-19 pandemic and the Ukraine crisis, resulting in a volatile global fuel market.

The price of fuel in Laos has increased six times so far this year, which has had a huge impact on the inflation rate.

Last month, the price of fuel and gas surged by 38.33 per cent over February 2021 while the cost of gold products rose by 16.49 per cent year-on-year.

Economists worry that the price of oil may continue to increase due to a supply-demand mismatch. The government may begin making adjustments to fuel prices every five to seven days, rather than every two weeks, if global fuel prices continue to rise.

In February, costs in the communications and transport category rose by two per cent month-on-month, and 15.64 per cent year-on-year. The rise in this category is linked to the fact that rising fuel prices forced transport operators to bump up their prices.

Meanwhile, prices in the goods and service category went up by 0.9 per cent month-on-month and 9.51 per cent year-on-year. For instance, the price of pork jumped to 50,000 kip ($4.35) per kg.

According to the LSB, the cost of meat and fish edged up by 5.3 per cent year-on-year while the price of fruit and vegetables rose by 6.8 per cent year-on-year.

The price of medical care and medicines jumped by 0.38 per cent month-on-month and 9.39 per cent year-on-year. Prices in the restaurant and hotel category increased by 0.11 per cent month-on-month and 8.65 per cent year-on-year.

The cost of food and non-alcoholic beverages in February gained 0.45 per cent month-on-month and 5.47 per cent year-on-year.

The government is taking steps to boost production in order to reduce imports, and to control the rising price of fuel to ease the impact on the economy and the general public.

The government has decided to cut value-added tax (VAT) from 10 to seven per cent this year and cut all fuel reserves, meaning that the current oil reserve price is now 0 kip per litre.