Central bank vows to stabilise exchange rates
Central bank vows to stabilise exchange rates
The Bank of the Lao PDR is still in a position to keep exchange rates stable as the country still has strong foreign reserves, according to the top central bank official.
Speaking at a national assembly session in Vientiane on Monday, the central bank's governor, Mr Somphao Phaysith said that the foreign reserves level in the country is sufficient to secure the import of goods for about 5.4 months.
He made the comment amid public worries about the fluctuation of the currency exchange as people are experiencing difficulties exchanging the Lao kip for foreign currencies, in particular the Thai baht. At present, most people who want to have currency exchanged have to go to the black market, which offers a higher rate than that the central bank set.
Despite Mr Somphao Phaysith expressing strong confidence that the central bank still held large amounts of foreign reserves and was able to secure the import of the goods for several months, he neglected to provide any further detail.
According to a report from the Ministry of Planning and Investment, in the 2012/2013 fiscal year, the import value of Laos was US$2.8 billion while export value was US$1.8 billion, resulting in a deficit of US$915 million.
Mr Somphao said one of the measures which the central bank has introduced to stablise the currency is to stop releasing loans for public infrastructure projects directly to project operators, stressing that this was not the role of the bank. The bank's main role is to act as a lender to commercial banks.
The central bank has also ordered commercial banks not to provide loans in foreign currencies to businesses and projects, which do not generate income in foreign currencies. The bank promotes the use of Lao kip.
He said the central bank has a wide range of tools available to stabilise currency exchange including policy on rates, reserve requirements and reference exchange rate measures, adding that exchange rate margin between reference rate and market rate has narrowed.
As of November 29, the exchange rate margin between the reference rate and market rate for Lao kip/US dollar was 0.22 percent, dropping from 3.3 percent in September and for Lao kip/Thai baht was 0.96 percent, dropping from 4.2 percent, he said.
Mr Somphao said that the central bank encouraged commercial banks to increase efforts to mobilise deposits as one of the measures to enable the banks to release more loans to acti ve investment projects in particular those concerning goods production, aiming to boost domestic supply.
He also said the commercial banks will be further modernised as part of efforts to encourage people to use banking services. At present, there are 32 commercial banks with 85 branches nationwide.
vientiane times
