The value of the Lao currency is rising against the US dollar, thanks to the continual flow of foreign currencies into the country.

The average 2006 exchange rate indicated that one US dollar was worth 10,157 kip; now one US dollar is trading at 8,744 kip.

Deputy Director General of the Monetary Policy Department, Mr Khamphout Sitthilath, told Vientiane Times on Tuesday the reason for the stronger kip is the result of both internal and external factors.

Domestically, political and financial stability combined with an expanding economy and a steady inflow of foreign currencies is keeping the kip strong against this currency.

Externally, the US dollar is declining in value against currencies worldwide, due to a slump in the US economy.

However, the rising value of the kip has both positive and negative impacts on the national economy.

The government will benefit from having to use fewer kip to buy US dollars for debt repayment.

Income per capita will be higher and people's confidence in the kip will increase accordingly. At the same time, holdings of the US dollar will reduce slightly.

Mr Khamphout said the increasing use of the kip indicates the stro ng value of the currency.

However, the ascending currency will impact negatively on companies earning in US dollars but purchasing in kip. They face declining profits and increasing expenses.

Employees paid in US dollars will also be adversely affected, particularly those working for foreign projects. For example, they may receive US$100 per month, which was previously worth around 1 million kip, but now has a value of about 870,000 kip.

Although exporting companies, such as those in the garment industry, are impacted by the stronger value of the kip, the central bank is confident the Lao economy will continue to grow.

Mr Khamphout said the robust economic growth is being fueled by the mining and electrical industries and large-scale investment projects.

He predicted the value of the US dollar may rise again after the US government introduces measures, such as interest rate cuts, to stimulate economic growth.

By Manichanh Pansivongsay
Vientianetimes