Central Bank Governor: Foreign reserve levels double
Central Bank Governor: Foreign reserve levels double
Foreign reserve levels have doubled in the first six months of this fiscal year after the Bank of the Lao PDR introduced measures to regulate foreign exchange in the country.
The central bank governor, Dr Somphao Phaysith told a National Assembly conference in Vientiane on Monday that foreign reserve levels doubled in the first six months of the 2013-2014 fiscal year and this was able to secure the import of goods and services for about 5.4 months.
According to the central bank, the average monthly value of imports into Laos in 2013 was US$136.81 million.
The rapid increase in foreign reserve levels has created confidence among business people in the value of the Lao kip. In addition, the sufficient supply of foreign currencies will not cause the money market to sell Lao kip at a lower price as was the case in the past.
Laos faced a supply shortage in foreign currencies at the end of 2013, forcing some commercial banks in Laos to limit the sale of foreign currencies such as Thai baht and US dollars to customers, causing serious concern among people who deposit money in Lao kip.
According to a report from the World Bank, Laos faced critically low foreign reserve levels for the first time in a decade at the end of 2013, adding that the reserve was able to secure imports for only 1.3 months.
Dr Somphao said one of the measures which the central bank imposed over the first six months of the current fiscal year was to urge commercial banks to stop issuing foreign currency denominated loans to companies which did not generate income in foreign currencies.
The decision was aimed to reduce pressure on the central bank over the supply of foreign currencies to the market amid a shortage, he said.
According to Dr Somphao, over the first six months of the current fis cal year, the value of the Lao kip saw an average decrease of 1.66 percent against the US dollar from 7,867 kip per one US dollar to 8,000 kip. However, the value of the Lao kip saw an average increase of 3.59 percent against the Thai baht from 259.32 kip per one baht to 250.33 kip per one baht .
Dr Somphao Phaysith said the central bank would try its best to maintain high foreign reserve levels, which are now able to secure the import of goods for about five months, adding that the monetary policy aims to boost macro-economic stability.
With sufficient foreign reserve levels, exchange rates between the Lao kip and major foreign currencies should be flexible within a five percent range, he said.
At present, the Bank of the Lao PDR is drafting a law to regulate the use of foreign currencies in Laos. According to the draft law, one of the new measures, which the bank wants to impose, is that all state, private and international organisations in Laos should pay wages in Lao kip.
vientiane times
