LAK - Lao Kip

The history of the formation and development of the Lao Kip (LAK)

Before the Lao Kip was introduced, the country used various currencies such as the Thai baht and the French franc.

In 1952, the Lao Kip was officially introduced for the first time, replacing the old Lao silver currency: 1 Kip = 100 old Lao silver.

In 1954, the Lao Kip was renewed and redesigned to become the official currency after Laos gained independence from French colonial rule.

After many monetary reforms, the Lao government issued new denominations to enhance the value of the Kip.

Currently, the Lao Kip is issued by the Bank of the Lao P.D.R. However, the LAK still faces many difficulties in maintaining its value due to the impact of inflation and global economic factors.

Lao Kip (LAK) Denominations

The Lao Kip is managed and officially issued by the Bank of the Lao PDR. Including coins and banknotes with the following denominations:

Lao Kip coins

Previously, the Kip had metal coin denominations of 10, 20, and 50 att. However, these denominations are no longer in circulation and are not commonly used in daily transactions.

Lao Kip banknotes

The current denominations of Lao Kip banknotes include:

• 500 LAK

• 1000 LAK

• 2000 LAK

• 10000 LAK

• 20000 LAK

• 50000 LAK

• 100000 LAK

Denominations from 500 kip and above are more commonly used in daily transactions.

Denominations of 1, 5, 10, 20, 50, and 100 Kip are rarely used due to their very low value.

Lao Kip (LAK) exchange rate

The exchange rate of the Lao Kip (LAK) is quite low compared to high-value currencies such as USD, EUR, and in the Southeast Asian region compared to THB (Thai Baht).

• 1 USD = 21.500 LAK

• 1 EUR = 23.000 LAK

• 1 THB = 630 LAK

The Vietnamese dong is worth a bit more than the Lao kip.

• 1 VND = 0.83 LAK

Depending on market fluctuations and economic conditions, this exchange rate may change.

Factors affecting the value of Lao Kip (LAK)

The value of the Lao Kip (LAK) is influenced by many economic and financial factors, both domestically and internationally. Below are the main factors affecting the value of the LAK:

Low economic growth

Laos is a developing country with an economy primarily based on agriculture and mineral extraction. This makes Laos vulnerable to fluctuations in global commodity prices. When the prices of export items such as wood and minerals decrease, the value of the Kip also declines.

Laos has not yet achieved sustainable economic growth and relies heavily on foreign investment aid, especially from Thailand and China. When these investment sources decrease, it puts pressure on the value of the LAK.

The high inflation situation

Inflation has been a serious issue in Laos in recent years. The rise in fuel and food prices has driven up the cost of living, reducing the value of the Kip. Average inflation in Laos remains high, negatively affecting the purchasing power of the people.

Trade balance deficit

Laos mainly relies on imports, especially energy, consumer goods, and machinery. Exports mainly consist of resources and agricultural products. However, the export level is lower than the import level, leading to an imbalance that causes a trade deficit, reducing the value of the Kip.

Low foreign exchange reserves

In Laos, the very limited foreign exchange reserves make the country vulnerable to fluctuations in the international market. This reduces the ability to control the exchange rate and makes the LAK susceptible to depreciation when the supply and demand for money changes or when there is a need to pay foreign debt.

High public debt

Laos faces a heavy public debt burden, especially from loans for infrastructure projects such as railways and hydropower dams. When the debt is due for payment, the pressure of foreign debt increases, weakening the Kip and causing it to depreciate.

The value of the Lao Kip is influenced by various factors. These challenges require Laos to implement comprehensive economic reforms to enhance the value of its currency in the long term.

Future of Lao Kip (LAK)

The future of the Lao Kip (LAK) remains a subject of considerable importance as the Lao People's Democratic Republic navigates an evolving economic landscape. As the nation seeks to enhance its integration into the ASEAN economic framework and attract foreign investment, the stability of the Lao Kip will be contingent upon prudent fiscal policies, effective monetary management, and sustainable economic growth. The Lao government's commitment to infrastructure development and diversification of its economic base stands to bolster confidence in the currency, fostering a conducive environment for trade and investment. However, challenges such as inflationary pressures and reliance on external economic factors, particularly from neighboring countries, may pose risks to the Kip's long-term stability. Consequently, a balanced approach that incorporates both domestic reforms and regional cooperation will be essential for ensuring the resilience of the Lao Kip in the global economic arena.