Lao economist outlines measures to address financial, economic difficulties

VIENTIANE, Sept. 5 (Xinhua) -- Restructuring economy and debt, strengthening currency and good governance, improving connectivity and practicing frugality are measures that can help address the financial and economic difficulties facing Laos, according to a Lao economist.

Lao News Agency (KPL) quoted Vice President of the Lao Academy of Social and Economic Science (LASES) Kikeo Chanthaboury as saying on Monday that the fragile economy of Laos has faced hardship due to various factors, including chronic budget deficit, which has resulted in the accumulation of high-level debt.

Frequent and severe natural disasters have added a heavy burden to state spending, he addded.

Kikeo underlined the urgent need to stabilize and normalize the macro economy, and to stop the exchange rate from rising and strive to bring it down.

For the immediate term, the economist suggested more attention should be paid to economic restructuring, including promotion of a production-based economy to lessen imports, and diversifying the economy away from heavy dependence on natural resources.

He noted that Laos' reliance on imports for more than 60 percent of its needs has made it difficult to manage inflation.

Inflation in Laos dropped to 25.88 percent year-on-year in August from 27.8 percent in July.

Kikeo highlighted the need to diversify foreign currency generating sources in order to increase foreign exchange reserves to boost the government's spending, especially for debt service payments. In this regard, he suggested the inspection of revenues earned from natural resources to ensure that revenues are fully collected.

In the face of increased debt service obligations, he recommended negotiations to restructure debt and postpone debt service payments.

Amid the current economic and financial hardships, the economist said there is a need to observe the government's frugality policy to cut unnecessary spending, especially on imported goods.

In the mid-term and longer term, Kikeo recommended the need to strengthen the local currency and to study measures to guarantee the value of the kip by attaching its value to gold and valuable assets. Foreign exchange reserves should be diversified to more currencies to minimize the risk of having to rely on a few currencies.

The China-Laos Railway and dry ports have already resulted in more tourist arrivals and trade flows, Kikeo said, adding more connectivity and logistics projects should be introduced to link Laos with the region and the world to promote trade and investment.

Given that Laos has abundant young workers, he said greater attention should be paid to human resource development and skill training to increase labor productivity, according to the report.