Rocketing currency exchange rates cause suffering for vehicle buyers

People who bought a car or other items under a down payment agreement, paying in US dollars or Thai baht, are struggling to keep up with subsequent payments due to the high value of these currencies versus the weak kip.
Some people are now having to pay double what they did before when using kip to pay regular instalments to a leasing company, while those whose are able to pay in foreign currencies are not affected.
People who borrowed US dollars or baht to buy a car or motorbike from a leasing company are complaining about the extra money they have to pay because of the unfavourable exchange rate.
Some people have had to return their vehicles as they could not continue to pay instalments because their income was insufficient.        
Mr Phim, one of many people who bought a car from a leasing company using the down payment system and setting up the purchase in US dollars, told the Vientiane Times that when he entered into the agreement three years ago the exchange rate was 8,500 kip to the dollar but today it is almost 19,000 kip.
Based on the exchange rate at the start of the agreement, it would take him five years to pay the full 150 million kip that he owed, but this amount has now spiralled to over 300 million kip, while his income has not changed because of the effects of the Covid-19 pandemic and the ongoing economic crisis.
He pointed out that the official kip-to-dollar exchange at the Bank of the Lao PDR was about 17,000 kip while some leasing companies and currency exchange units were charging almost 19,000 kip per dollar.
The kip fell in value by 37.4 percent against the US dollar and 32.9 percent against the Thai baht in the official market from January to August, according to the Asian Development Bank.
The ongoing weakness of the kip currency has resulted in continuing rising prices, while people’s incomes remain low and in some cases have fallen.
The price rises are linked to the Russia-Ukraine conflict, which saw households trimming daily consumption spending, affecting output growth.
In addition, sharp increases in the price of fertiliser, animal feed, food and fuel have discouraged farmers and producers from expanding their operations.
The government is working to find solutions to the cost-of-living crisis but faces an insurmountable barrier in that most goods are imported and must be paid for in foreign currencies.
At the same time, the government’s foreign currency reserves are dwindling so there is no money to be given to importers or to pay off the interest owed on public debts.
Rising inflation and the ever-growing public debt have ramped up economic and financial pressures on the government.
Laos has one of the highest inflation rates in Southeast Asia, largely because the country imports more than it exports.
Meanwhile, the growing demand for the foreign currencies needed to import goods and repay debts is causing the kip to weaken further.

By Times Reporters
(Latest Update October 18, 2022)