Central bank vows to keep economy stable, fight inflation
Central bank vows to keep economy stable, fight inflation
The Bank of the Lao PDR has committed to keep the economy stable in line with the government's monetary policy this year despite uncertainty in the global market.
The central bank's governor, Mr Somphao Phaysith, told members of the National Assembly recently that world economic uncertainty would pose significant challenges to the implementation of Laos' 2013-14 socio-economic development plan.
Mr Somphao said the central bank predicted the price of fuel, gold and equities, along with the exchange rate, would continue to fluctuate this year, which would negatively impact on the implementation of the monetary policy.
He said despite the challenges, the central bank would try its best to secure monetary stability by improving and developing monetary policy tools.
In the 2013-14 fiscal year, the central bank plans to circulate 523.6 billion kip of new bank notes, which is a decision approved by the National Assembly. It will also inject 1,799.6 billion kip of bank notes into the economy and withdraw 1,276 kip from circulation.
The central bank will continue the managed floating exchange rate policy, keeping a close eye on inflow and outflow of foreign currencies and stron gly promoting the use of the Lao kip.
As p art of efforts to control inflation, the central bank will improve the make up of the banknotes in circulation. The bank has faced complaints from members of the public and academics that there are too many big, high-value notes in circulation, w hich makes the prices of goods higher.
People want the central bank to print more small bank notes so it is easier to get small change.
But it costs the central bank more money to print small notes compared with big ones.
In an effort to reduce the overall number of bank notes in circulation, the bank will promote non-cash transactions and modernise the banking system. It will also encourage commercia l banks to expand their services into countryside so people there can access financial services.
The central bank will stop its direct lending and instead act as a final source of money for commercial banks. It will also increase its efforts to supervise commercial banks to ensure their security.
The central bank will encourage commercial banks to take in deposits worth 46 percent of GDP in this fiscal year, and to release loans worth 41 percent of GDP. The central bank said the rate of inflation must be below the GDP growth rate of 8 percent to ensure the health of the economy.
vientiane times
