Central bank urged to keep exchange rate stable
Central bank urged to keep exchange rate stable
Business people in Laos have mixed feelings as the value of the Lao kip has continued to drop against the US dollar over the past five months.
“The rise of the US dollar against the Lao kip is good news for exporters but bad news for importers,” Lao National Chamber of Industry and Commerce Secretary General, Mr Khanthavong Dalavong told Vientiane Times yesterday. “It would be good if we can keep the currency exchange stable.”
He made the comments amid the devaluation of the kip against the US dollar over the past five months. According to information from the Bank of the Lao PDR, the value of the US dollar was 7,652 kip at the end of May, but by December 27 one US dollar was worth 8,025 kip.
Mr Khanthavong said exporters would be happy with the appreciation of the US dollar against the Lao kip as they generate income in US dollars and pay administrative and labour costs in Lao kip, so the increasing value of the US dollar will increase the profits of the exporters.
He said that Lao exporters suffered over the past years due to the declining value of the US dollar against the Lao kip therefore they were happy to see the appreciation of the foreign currency. Among the businesses which are happy with the rising value of the US dollar are garment factories as they can generate more profit due to the exchange rate difference.
“We see the appreciation of the US dollar as very positive but we are not sure whether the US dollar will continue to rise against the Lao kip,” said one factory owner. “The appreciation of the US dollar may be temporary therefore we haven't made any adjustments to our business plans.”
While many exporters are happy with the rising value of the US dollar against the Lao kip, importers said that the move would cause negative impacts on their businesses as they have to increase the prices of their goods on the local market in accordance with the fluctuating exchange rate.
They said that if they did not adjust the prices of goods in Laos, they will have to shoulder losses due to the exchange rate, adding that Laos imports most of its consumer goods from neighbouring countries, in particular Thailand and Vietnam.
Economists said that one of the best solutions available to the central bank is to try to keep the exchange rate stable, as the stability of the Lao kip would make all sides happy.
The Bank of the Lao PDR has made a strong commitment to keep the exchange rate stable within a five percent range. However, many business people have said that it would be better if the bank could maintain fluctuations within a two percent range.
vientiane times
