As the value of Kip depreciates against foreign currencies, especially the US dollar, residents are finding it increasingly difficult to repay the installments on their cars or motorbikes.
This is not a pertinent issue for people who earn in dollars as the exchange rate doesn’t impact the amount they owe. However, people who earn in Kip, are having to pay nearly double due to the weakening of the local currency from the time they bought the vehicle.
Some owners who bought their vehicles from a leasing company with a down payment in US dollars or Thai Bhat are now in serious debt due to the extra money they have to shell out due to the unfavorable exchange rate. Some people are even returning their vehicles because they couldn’t keep up with the payments.
A car owner, Mr. Phim, told the Vientiane Times that he purchased his vehicle under a down payment three years ago when the exchange rate was around LAK 8,500 per USD but today it is almost LAK 19,000.
It would take him five years to repay the full amount of LAK 150 million, but due to the effects of the Covid-19 pandemic and the ongoing economic crisis, this amount has increased to over 300 million kip, while his income has remained the same.
He noted that the official exchange rate from LAK to USD at the Bank of the Lao PDR was approximately LAK 17,000 per dollar, but some leasing companies and currency exchange units charged nearly LAK 19,000 per dollar.
The Bank of the Lao PDR has recently issued a notice permitting currency exchange businesses to only purchase foreign currencies but prohibiting them from selling any other currency apart from Kip.
The government has also vowed to tackle inflation and other economic difficulties in its recent Party Committee meeting that took place last week.