The Lao kip has continued its depreciation against foreign currencies, affecting the cost of living amid the Covid-19 pandemic.
In recent months, a mismatch in supply and demand has increased the gap between official and parallel market currency rates, putting importers under pressure and increasing inflation.
Official exchange rates set by the Bank of the Lao PDR (Central Bank), saw the Lao Kip trading at 9,494 (LAK/USD) today.
The shadow exchange rate, however, tells a very different story.
Nearly 11,000 Kip per US Dollar
Unofficial currency traders are exchanging the Lao kip at nearly LAK 11,000 per US dollar, and up to LAK 342 per Thai baht; rates that have not been witnessed in the country for many years.
The underground exchange rate persists despite the Bank of the Lao PDR drafting a new administrative regulation intended to regulate currency exchange businesses following the depreciation of the Lao kip against foreign currencies.
The Bank of the Lao PDR (BOL) made a commitment last year to try to maintain the value of the Lao kip against major international currencies within a five percent range.
One resident of Vientiane Capital told the Laotian Times that she has a US dollar-denominated car loan that she must pay installments on using the bank’s official exchange rate.
“With the depreciation of the Lao kip my car loan repayments are getting more and more expensive because I earn Lao kip but have to make payments in dollars,” she said.
“The unofficial rate has reached nearly 11,000 kip to the US Dollar,” she added.
A weakened local currency (LAK) has caused the cost of living to rise in Laos, as well as affecting businesses amid the Covid-19 pandemic.
Food prices have increased by 4.71 percent this year, while clothing prices have increased by 4.17 percent, furniture prices have increased by 3.84 percent, and medicines have increased by 4.93 percent, according to a report issued by the National Economic Research Institute (NERI) in March this year.