Logo of Phnom Penh Post newspaper Phnom Penh Post - Only 33% of export receipts flow back to Laos’ economy

Only 33% of export receipts flow back to Laos’ economy

Content image - Phnom Penh Post
Bank of the Lao PDR (BoL) governor Sonexay Sithphaxay. VIENTIANE TIMES

Only 33% of export receipts flow back to Laos’ economy

Laos is facing a challenge with respect to foreign currency outflow, which is more than the amount of foreign currency entering the country through the banking system.

Bank of the Lao PDR governor Sonexay Sithphaxay told a news conference recently that only 33 per cent of the total export value entered the Lao economy through the banking system over the past four months of this year, with the rest deposited offshore.

Meanwhile, 98 per cent of the total import value was transferred out of the country through the banking system in this period. This means that commercial banks in Laos have been able to buy less foreign currency than anticipated, especially Thai baht and US dollars.

Another important feature is that actual foreign investment inflows through the banking system were much lower than the agreed value of investments.

Despite a trade surplus of $589.66 million over the past four months and resilient foreign direct investment (FDI) inflows, the supply of foreign currency needed to import goods, including fuel, has remained insufficient.

Rising demand for external debt servicing and the demand for foreign currencies needed to import goods have resulted in a current foreign exchange pressure. The depreciation of the kip is impacting inflation as businesses need to spend more to buy foreign currencies to import goods.

Year-on-year inflation in Laos increased from less than two per cent in February 2021 to 9.9 per cent in April 2022 and threatens living standards, especially in low-income urban households.

Over the past four months of this year, the kip depreciated by 18.36 per cent against the US dollar and by 9.4 per cent against the Thai baht compared to the figures recorded in the same period last year, according to Sonexay.

According to the World Bank’s latest economic update for Laos, the kip depreciated sharply in 2021-2022, by about 30 per cent against the US dollar over the year up to April 2022, reflecting considerable external liquidity constraints.

“The limited availability of foreign currency, coupled with high demand – for imports and debt service repayments – has caused a demand-supply mismatch that creates strong depreciation pressures, despite significant debt service deferrals,” the World Bank (WB) said.

The bank also stressed that global monetary tightening and rising interest rates could put further pressure on the kip, add to inflation, and increase debt burdens. This would constrain investment inflows and financing options.

The prolonged Russia-Ukraine conflict could further affect commodity prices, especially for fuel, while weaker-than-expected growth in key partners, particularly China, would restrict external demand.

The WB’s report recommends restoring macroeconomic stability, mainly by increasing both revenue collection and spending efficiency.

At the cabinet’s monthly meeting held recently, the government ordered action to stabilise the exchange rate and to improve transaction mechanisms through the banking system.



  • ‘Education’ a priority traffic-law penalty

    A top National Police official on June 21 neither rejected nor confirmed the authenticity of a leaked audio message, which has gone viral on social media, on a waiver of fines for a number of road traffic-related offences. General Him Yan, deputy National Police chief in

  • Pursat Ford assembly plant opens

    The Kingdom’s first Ford assembly plant was inaugurated on June 16 in Pursat province amid rising demand for brand-new vehicles among Cambodians. The facility is seen as a game changer for the domestic automobile industry, which could bring a wave of investors seeking to cash

  • Siem Reap’s $18M zoo said to educate public, help wildlife

    Angkor Wildlife and Aquarium Co Ltd has invested $18 million in a zoo in Siem Reap province, which will be opened in October to educate and promote animal conservation as well as attract national and international tourists. Currently, the Angkor Wildlife and Aquarium is building the

  • Angkor photo rules clarified

    The Apsara National Authority (ANA) denied that it had banned the use of camera tripods in the Angkor Archaeological Park, explaining that the confusion stemmed from a long-standing rule which required commercial photographers and videographers to apply for permission to film. The explanation followed a

  • $50B infrastructure plan en route

    The government’s upcoming $50 billion,10-year infrastructure master plan will provide tremendous investment opportunities for domestic and foreign entities, transport experts and economists say. Minister of Public Works and Transport Sun Chanthol revealed the plan to Japanese ambassador to Cambodia Masahiro Mikami on June 15. At

  • Volunteer scheme to foster ‘virtuous’ humanitarian spirit

    A senior education official said volunteer work contributes to solidarity and promotes a virtuous humanitarian spirit among the youth and communities. Serei Chumneas, undersecretary of state at the Ministry of Education, Youth and Sport, made the comment during the opening of a training programme called “