Prices of goods at local markets continue to rise, affecting livelihoods of local people. - VT
VIENTIANE (Vientiane Times/Asia News Network): Skyrocketing inflation has forced many Lao families to cut spending on food, health and education to ensure their income keeps pace with the rising cost of living in the country, according to a new World Bank survey.
In Round 7 of the World Bank’s Rapid Monitoring Phone Surveys, conducted during June-July 2023, 87 per cent of households said they are somewhat or significantly affected by inflation. To cope, most reported growing or gathering more food, switching to cheaper food, or reducing the amount they eat.
“Poor families say they are also taking on more work, selling assets, or borrowing. Just over half the households affected by inflation report reducing their spending on education, and more than 14 per cent of school-aged children from the low-income households interviewed are not enrolled in school,” the World Bank said.
The Country Manager for the World Bank in Laos, Alex Kremer, said: “The effects of the economic situation on the most vulnerable, and on human capital, are worrying. If families are forced to cut back on nutrition, education and health spending, the effects of a few economically hard years could affect national development for a much longer period.”
The Vice President of the Lao Academy of Social and Economic Science, Dr Kikeo Chanthaboury, said the government has introduced a number of policies and measures to stablise exchange rates and handle inflation.
These include boosting domestic production, attracting more tourists to Laos, restricting imports of products the country can produce, and ensuring all foreign currency earned from exports and foreign investments enter the country through the banking system.
While inflation has eased since early 2023, Laos still has one of the highest inflation rates in the region. The Lao kip continues to depreciate against foreign currencies, driving up the cost of many imported products that domestic consumers depend on.
Average household incomes rose by 11.5 per cent between May 2022 and May 2023, but year-on-year inflation stood at around 36 per cent over the same period, and 54 per cent of families reported unchanged or declining incomes, according to the World Bank.
In response, many wage earners and businesses are switching to or increasing farming activities, and looking to increase local production and take advantage of a favourable export market.
Workers are increasingly migrating, both within and outside the country, in search of higher wages and better jobs. In the latest survey, 11 per cent and 5.3 per cent of interviewed households reported having at least one member migrate to another province or country over the past year.
“Food security concerns have become particularly prevalent in urban areas, while families and businesses led by women report the greatest impact from inflation,” the World Bank said.
To stabilise the economy, the World Bank recommended moving away from tax cuts and exemptions, returning VAT to 10 per cent, improving the quality of public investment and concessions, strengthening bank supervision, bringing debt negotiations to a successful conclusion, and making rules for private investment simpler.
