Lao Kip Drops to 15-Year Low

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Central Bank Governor Explains Reasons for Weak KIP

The Lao kip has continued its depreciation against foreign currencies, reaching its lowest value against the US dollar in more than fifteen years.

The value of the national currency of Laos continues to plummet despite attempts by the Bank of the Lao PDR (BOL) to reign in inflation.

While the Lao kip has steadily lost ground since its original rate of LAK 452.5 to the USD  in 1975, it has now reached its lowest value in over 15 years.

The value of the kip began to plummet in August last year as economic woes struck the country amid the Covid-19 pandemic, trading at 9,494 in July according to rates set by BOL, while the shadow rate reached nearly LAK 11,000 to the dollar.

The Lao kip has been potentially the worst-performing currency in Southeast Asia over 2021, dropping over 14% in value against the USD.

Value of the Lao kip over the past year (XE.com)
Value of the Lao kip over the past year (XE.com)

Today’s official exchange rate posted by the Bank of Laos sees 10,689 to the US dollar, making it the lowest official rate since July 2005, when the kip fell to 10,919, according to statistics provided by the International Monetary Fund.

In a bid to tighten its grip on currency and close the gap between the official rate and the shadow rate, BOL drafted new regulations to control currency exchange businesses. The regulations attempt to ensure individuals and legal entities who wish to operate a currency exchange business first obtain the proper license from the central bank.

Meanwhile, the shadow rate has fallen to LAK 11,600 to the US dollar.

The gap between official rates and parallel market currency values has increased in recent months, putting importers under pressure and causing rising inflation.

Residents have complained of the high cost of living and prevalence of fuel shortages caused by inflation, with regulated fuel pricing and the unfavorable exchange causing fuel importers to make a loss.