Lao PM introduces new measures to tackle inflation

But workers are not optimistic about the reforms.
By RFA Lao
Lao PM introduces new measures to tackle inflation People walk through a market in southern Laos July 2023. A weak currency and high inflation rates have eroded the buying power of Lao workers.

Lao Prime Minister Sonexay Siphandone announced to the National Assembly that his government will introduce new measures to address the nation’s prolonged economic woes, including imposing exchange rate controls and regulating food prices.

But workers said they weren’t very hopeful that the steps, some of which have already been tried, would be effective.

Authorities have struggled to tackle surging inflation and the weakness in the kip, the currency, both of which have eroded ordinary people’s weak buying power.

Last month, the prime minister decided to raise the national minimum wage for the third time since 2018.

The government’s new economic measures also include cracking down on black market currency exchanges, boosting domestic production and encouraging the flow of foreign currencies into the nation’s commercial banking system.

The prime minister also said civil servants, who receive some of the lowest wages in Southeast Asia, would be given a 150,000 kip ($7.50) monthly allowance to keep up with a steadily worsening cost-of-living crisis.

The World Bank reported that real household incomes in Laos have suffered significantly from the rising cost of living. 

In a survey conducted in June 2023, 54 percent of households surveyed said that their income had remained stable or declined since May 2022, even as inflation increased 39 percent over through May 2023. While average nominal wage grew only 5.7 percent, inflation-adjusted wages dropped by an average of 33 percent in one year.

‘The same measures!’

Many workers, none of whom wanted to be identified for safety reasons, are not optimistic about the potential of these new economic measures.

“‘The same measures! They didn’t work. Look at the exchange rate today, it’s already 650 kip per Thai baht and all food prices are up three times,” one worker told RFA. For reference, the exchange rate was approximately 500 kip per Thai baht in December 2022.

‘[The prime minister] just talks and talks, nothing happens. He has said this many times before, nothing has gotten better. The government can’t do anything; [the government] announces this measure, then that measure–but the inflation and the kip depreciation are still high, way too high.’

Another worker from the capital of Vientiane expressed frustration with the government’s failure to address the cost-of-living crisis.

‘Before, with 100,000 kip ($5), I could buy food for the whole day and the whole family. Now, with that much money, I can’t even buy a kilogram of meat,’ he told RFA.

In response to these economic challenges, many young Lao workers have chosen to find work abroad and send their wages back to Laos to support their families.

‘All my children have gone to Thailand to work. Many young Laotians are in Thailand right now,” a man from Champasak Province in southern Laos told RFA.

Call for patience

Economic officials in Laos maintain that the reforms will work in the long run and urge workers to be patient.

“Yes, the kip is still weak and imports are growing. That’s what we’re

trying to gradually solve. We can’t do it all at once,’ one trade official told RFA. 

‘We’re encouraging people to produce more so that we can reduce imports. We will be controlling the exchange rates.’

‘Now, all the government can do is to encourage people to practice self-sufficiency or family economy by growing vegetables and raising animals,’ another official added.

One small business owner told RFA that Lao workers have lost faith in their government’s ability to improve the economy.

“Even if they lower the official exchange rates, they cannot really control the black market exchange rates, which are 30 to 40 percent higher than the official rates,” he explained. 

‘Many Laotians have lost confidence in the government and in the measures because they’re not working. They’ve never worked; nothing has improved, the kip is still weak and inflation is still high, prices are rising. People are getting poorer.’ 

The business owner also noted the increase in young workers going abroad in search of better wages.

‘The only solution for younger Laotians is to go to Thailand to work; it’s not worth working in their country because the wages are too low. They can’t live with wages that low.’

Translated by Max Avary. Edited by Claire McCrea and Malcolm Foster.


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