Vientiane, Laos: Laos is experiencing double-digit inflation of over 40%, leading to constraints on the Lao New Year celebrations. The celebration marks the first public observance of the holiday in the country. The inflation has resulted in significant price increases, causing ordinary citizens to spend more money on holiday-related food and goods.
The country’s one-party government has been unable to control the surging inflation, growing external debt, and the devaluation of the Lao currency in the largely impoverished country. The rise of the Thai baht has led to an increase in New Year inflation, as Laos mainly imports goods from Thailand, followed by Vietnam and China.
Inflation is a persistent problem in many developing countries, including Laos. Inflation refers to the general increase in prices of goods and services over time, leading to a decrease in the purchasing power of a currency. In recent years, Laos has experienced a high rate of inflation, particularly in food prices, which has had a significant impact on the food security of rural people.
Laos has seen a staggering surge in inflation, with government figures revealing a rate of 41.3% in February compared to the World Bank’s report 37 % by October last year with food price inflation at 39%, The government has implemented measures to tackle the crisis by imposing import restrictions and closed private money exchangers, limiting currency exchange to banks.
The increase in inflation has been driven by a depreciation in the Lao currency, the kip, and a reduction in foreign investment. However, people claimed that import restrictions have worsened the crisis, as the country relies on imports from Thailand. Some merchants have been forced to increase prices, exacerbating the situation. While inflation affects all people in Laos, it has a disproportionate impact on the rural population and low-income earners, who spend a larger proportion of their income on food and have limited access to markets and financial services.
Those who live in rural areas, farmers, low-income earners and government employees whose salaries have not kept pace with price increases, have been the hardest hit by the crisis.
The impact of high inflation on the food security of rural people and low-income earners in Laos is concerning. Food security refers to the ability of individuals and households to access sufficient, safe, and nutritious food to meet their dietary needs and preferences for an active and healthy life. High food prices make it difficult for rural people to access and afford the food they need to stay healthy.
According to a study by the World Food Programme (WFP), nearly 1 in 7 households in rural areas of Laos is food insecure. Diverse regions across the nation are experiencing varying degrees of food insecurity. While some districts witness a food-insecurity rate of about 28 percent, others only observe a 3 percent rate. Urban zones, particularly in Vientiane Capital, have observed a decline in food insecurity.
On the other hand, rural areas experience a higher rate of food insecurity, with 17 percent of households affected compared to 7 percent in urban zones. This difference is most noticeable in Vientiane Capital, where only 3 percent of households are affected.
This means that they do not have enough food to meet their basic needs. The study also found that food prices were the most significant factor affecting food security in rural areas of Laos.
Households that are encountering a decrease in income are especially susceptible to food insecurity. Those that have undergone a significant drop in income (more than 50 percent) are over two times more likely to experience food insecurity (22 percent) compared to those whose income stayed the same or increased (10 percent).
More than 50 percent of the population relies on various coping methods to provide food and meet other basic necessities.
The impact of high food prices on the food security of rural people in Laos is not only economic but also social. When households cannot afford to buy enough food, they are forced to cut back on other expenses, such as healthcare and education, which can have long-term consequences for their well-being and future opportunities.
The impact of high inflation and food prices on the food security of low-income earning people in Laos is not a new problem. It is a structural issue that requires a long-term solution. In the short term, the government and international organizations can provide assistance to vulnerable households, such as food assistance and cash transfers.
However, to address the root causes of the problem, structural reforms are needed to improve agricultural productivity, reduce reliance on imported goods, and strengthen rural infrastructure and financial services.
This also impacts the economy and affects the social well-being and future opportunities of rural households. The problem requires a comprehensive and long-term solution that involves both short-term assistance and structural reforms.
One of the ways to address the problem is to increase agricultural productivity in rural areas of Laos. According to the Asian Development Bank (ADB), agriculture accounts for 24% of Laos’ gross domestic product (GDP) and employs nearly 70% of the population. Improving the productivity of the agriculture sector can increase the availability of food and reduce the reliance on imported goods, thereby reducing food prices and improving the food security of rural and low-income earning people.
Another way to address the problem is to strengthen rural infrastructure and financial assistance. Rural areas of Laos have limited access to markets and financial services, which hinders their ability to invest in agricultural productivity and access credit. The government and international organizations can invest in rural infrastructure, such as roads and irrigation systems, educate on alternate farming systems in addition to shifting cultivation, and provide financial services to rural households, such as microfinance and insurance and increasing the chance to international organizations to directly work with people, to improve their environment, livelihoods and food security.
In addition, reducing reliance on imported goods can also improve the food security of rural people in Laos. According to the Lao National Statistics Bureau (LNSB), Laos imports nearly 80% of its food. This reliance on imported goods makes the country vulnerable to price shocks and supply disruptions. Encouraging domestic production of food and reducing reliance on imported goods can increase the availability of food and reduce food prices, thereby improving the food security of rural people.
This problem begs for a comprehensive and long-term solution that involves both short-term assistance and structural reforms for the landlocked nation. Increasing agricultural productivity, strengthening rural infrastructure and financial services, and reducing reliance on imported goods are some of the ways to address the problem. By taking these steps, Laos can improve the food security and well-being of its general population.