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Monday, June 17, 2024

Lao PM Calls for ‘De-dollarization’ and Further Regulation of Foreign Currencies

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Prime Minister Sonexay Siphandone signed a seven-page order on 14 July to ensure that foreign exchange earned through exports and foreign investments, enters the country through its banking system.

According to Xinhua, this latest regulation during a time of soaring inflation and mounting public debt, is an effort to increase the supply of foreign currencies in the country, leading to de-dollarization, and more demand for the Lao kip.

Currently, a little over 30 percent of export receipts in Laos enter through the country’s banking system, which doesn’t help in reinstating the country’s depleting foreign currency reserves due to the overall imbalance of payment in the country.

Hence the government has ordered the Bank of the Lao PDR (BOL), to improve its electronic payment system for financial transactions and to regulate the use of foreign currencies in special economic zones, where payment of services are often made in stronger currencies like the Thai Baht.

The order also instructed the Ministry of Finance to collect taxes and revenues from businesses and exporters in foreign currencies if they generate income in currencies other than Lao Kip.

Additionally, the Ministry of Industry and Commerce was asked to develop an electronic system that enabled the sharing of data with BOL and other sectors to regulate import and export activities.

Moreover, the order also instructed importers and exporters to hold specific bank accounts in Laos to facilitate their financial transactions and also register with the Ministry of Industry and Commerce to transfer export revenue via the banking system and into specific accounts.

Exporters who need to park their foreign currency overseas to repay loans in other countries should also seek prior permission from the BOL.

Relevant sectors in the country were also asked to regulate and monitor the inflow of foreign currencies earned from foreign investments and provide regular updates to the central bank.

Government officials were informed to keep supervising that the payment of goods, services, salaries of local employees, etc. was made in Lao Kip. Using local currency was also a mandate for businesses that sell goods online. Only foreign experts and expat employees can continue to receive their salaries in foreign currencies, says the notice.

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