Foreign Exchange Rate in Laos

In June 1976, the "liberation kip" replaced the old kip at a rate of twenty to one. Three years later, following a massive collapse of the value of the currency, a "new kip," or National Bank kip, was introduced, worth 100 liberation kip, and the official exchange rate was fixed at thirty-five new kip to one United States dollar. A system of multiple exchange rates has been implemented in an effort to control inflation; different rates are applied to the transactions of businessmen, tourists, senders of remittances, and aid agencies. In September 1987, however, with a devaluation of the commercial rate of roughly 900 percent relative to the United States dollar, the multiple rates were abandoned in favor of a single floating exchange rate applicable to all transactions.

The exchange rate is adjusted periodically relative to the dollar. In 1988 it stabilized at about K340 to the dollar, in part because the government stopped accepting United States dollars and Thai baht in payment for commercial or customs taxes, thus reducing holdings of kip. By late 1989, the kip had been devalued by 100 percent--relative to the 1987 rate--where it remained stable at about K700 to the dollar through 1992. The exchange rate was K721 to the dollar in June 1994--in part because of the government's decision to allow the free exchange of hard currencies.

In September 1990, Decree 53 ordered that all transactions within the country be conducted exclusively in kip; in practice, however, foreign currencies remain in daily use because consumers do not have enough confidence in their own currency. The kip, Thai baht, and United States dollar are used interchangeably. Under Decree 16, state-owned enterprises and private enterprises are allowed to maintain accounts in both kip and foreign exchange.