Laos provides credit for fuel imports after pumps run dry
The Lao government will provide fuel importers with a Letter of Credit worth US$200 million (7.1 billion baht) for the purchase of fuel to meet the nation’s needs for the next two months, Deputy Prime Minister Sonexay Siphandone told the National Assembly on Thursday.
This amount will be enough to purchase 200 million litres of fuel, which would cover demand for July and August at 100 million litres per month, Sonexay said.
The government will continue to provide foreign currency to importers throughout the year in a bid to procure sufficient fuel, he added in response to Assembly members’ questions about the government’s plan to deal with the ongoing fuel shortage.
The government is providing credit despite limited foreign currency reserves. The plunging value of the kip has placed an added burden on importers struggling to source sufficient foreign currency to buy much-needed fuel, all of which must be imported.
Sonexay said the government would source foreign currency from companies that export minerals and agricultural produce, which would be given to fuel importers over the remaining months of this year. The government allocated $60 million for use by fuel importers in June and the Finance Ministry recently provided an additional $10 million.
From June 1-21, $102 million was sourced to pay for imported fuel, which was enough to cover normal needs and included money sourced from commercial banks. This has enabled more petrol stations to open, Sonexay said.
Laos imports all of its fuel – on average 100-120 million litres per month.
Prior to the fuel-price crisis, it cost the country $600-$700 million to import sufficient fuel for one year. But that cost has doubled in line with the spiralling price of fuel on the world market, Sonexay said.
“The demand for foreign currency has also risen sharply, so sourcing sufficient foreign currency to buy fuel is difficult,” he told Assembly members.
Laos currently buys fuel from Vietnam, Thailand, Malaysia and Singapore.
The government is looking at ways to diversify sources of fuel it imports so that disruption to one source would not cause a crisis, the deputy PM said.
In the longer term, the government will consider ways to promote investment in oil refinery plants in Laos where crude oil could be refined to ensure fuel security. There are currently no such plants operational in the country.
Sonexay also vowed action against profiteers who manipulate exchange rates unlawfully, after learning that the disparity between exchange rates offered by commercial banks and some currency exchange units was inappropriately large.
Currency exchange units found to be in breach of the regulations have had their licences revoked, he added.
Vientiane Times
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