Vientiane, Aug 28 (IANS): The Lao central bank, the Bank of the Lao PDR (BOL), is set to further increase interest rates to alleviate inflationary pressures currently affecting the economy.

The bank's Monetary Policy Committee has decided to raise the interest rate on Lao currency kip from 10 per cent to 10.5 per cent per year. The interest rate on foreign currency deposits will also be increased, rising from 10 per cent to 11 per cent per year, according to a report issued by the BOL on Wednesday, reports Xinhua news agency.

This latest adjustment follows a previous decision by the BOL, announced on June 12, to raise the interest rate on kip from 8.5 per cent to 10 per cent per year, reflecting the bank's commitment to addressing the ongoing economic challenges.

The BOL is also advancing efforts to improve foreign currency management and develop a payment system that connects domestic and cross-border banks to promote the use of the Lao currency kip.

In addition, the BOL launched a trial run of an online foreign exchange market system through the Lao Forex Exchange (LFX) platform to integrate and centralise the foreign currency exchange system.

Laos' economy remains highly sensitive to the global economic situation due to the ongoing imbalance between the supply and demand of currency.

Additionally, ongoing credit growth in the banking sector can lead to excessive demand for goods and services, pushing up prices and contributing to inflation, according to the report.