Business News Asia, an international website that provides business and financial news, analysis, and opinion on companies, industries, and economies in Asia, deemed the Lao kip (LAK) as one of the most undervalued currencies globally.
This is primarily due to the country’s struggling economy and its heavy dependence on imported goods instead of boosting local production capacity, which ends up depleting the country’s forex reserves.
Along with currencies like the Vietnam Dong, and Uzbekistani Som, the LAK has been categorized as a currency that is currently severely undervalued in the world for a variety of reasons.
In the article published earlier this month, the publication pointed out that Laos being a small country, has a less diversified economy and that plays a pivotal role in currency depreciation, as it highly affects the confidence of potential international investors.
Laos is also heavily dependent on the export of agricultural goods and from Lao nationals working overseas. If commodity prices decline, Laos will earn less money from exports. Similarly, if the amount of inward remittances sent home by Lao nationals working abroad falls, the Kip would suffer.
The depreciation of LAK can also be attributed to the consistent trade deficit reported in the country month-on-month and current account imbalances.
Additionally, Business News Asia informs that if nothing pertinent is done to fix the strength of LAK, it could pose threats to Laos’ economic stability and ultimately impact foreign investment and trade dynamics.
To increase the supply of foreign currencies and demand for the Lao kip, Prime Minister Sonexay Siphandone issued a seven-page order to the Bank of the Lao PDR (BOL) and the Ministry of Industry and Commerce in July to ensure foreign exchange earned through exports and foreign investments, enters the country through its banking system, among other efforts to strengthen the national currency.