Ms Vatthana Dalaloy addresses a panel discussion organised by the Bank of the Lao PDR.

Central bank reveals draft legislation on foreign currency

The government is taking steps to regulate the use of foreign currencies and encourage wider use of the kip, with the aim of lowering inflation and strengthening the value of the kip.
The Bank of the Lao PDR (central bank) on behalf of the government on Friday organised a panel discussion on foreign currency legislation, especially the use of foreign currency and foreign currency bank accounts.
Panel members shared opinions on two draft pieces of legislation in relation to these areas of concern.
The proposed legislation will be used by the central bank and associated entities to regulate the use of foreign currency and the opening of foreign currency deposit accounts.
It is aimed at creating uniformity at the central and local levels in the fostering of trade, services and investment in Laos, with the goal of ensuring that more foreign currency revenue enters the Lao banking system.
The ultimate aim of the central bank is for all entities in Laos to use the kip uniformly, carry out transactions in foreign currency in the prescribed manner, use foreign currency sparingly, and ensure that sufficient foreign currency is available to make essential payments to other countries.
To date, the central bank has not formulated any specific legislation on the use of foreign currency and the opening of foreign currency deposit accounts in Laos, meaning that possession of foreign currency, both that deposited in bank accounts and used in cash transactions, has not been uniformly regulated, the bank’s Deputy Governor Mr Soulivath Souvannachoumkham said.
Although legislation in this regard has been enacted in the past and the bank has actively promoted the use of kip throughout the economy, legislation has not been enforced and most people ignore it, he added.
There is strong public demand for foreign currency, and there is a high kip exchange rate. When people in possession of foreign currency wish to exchange it for kip, they do not use a bank.
Most people want to retain any foreign currency they have, and many have been in the habit of using foreign currency for a long time.
Most of the goods sold in Laos are imported and the price of goods and services is determined in foreign currency, with the result that foreign currency transactions are commonplace.
Based on directions issued by the government and Secretary General of the Lao People’s Revolutionary Party and President of the Lao PDR, concerning the use of foreign currency and the opening of foreign currency deposit accounts in Laos, the central bank believes that now is the right time to set strict and clear rules on the use of foreign currency and the opening of foreign currency bank accounts, with the aim of enforcing widespread public use of the kip.
To this end, it is necessary to enforce the amended Law on the Management of Foreign Currency that was approved in 2022 and a Prime Minister’s Order on foreign currency management issued in July 2023.
This legislation enables the central bank to specify which entities can use foreign currency in Laos, such as special economic zones, border trade zones and duty-free shops, as well as businesses that pay taxes to the government and whose main source of revenue is in foreign currencies.
The government has instructed the central bank to tighten the electronic foreign currency payment system and use efficient methods to verify that transactions are correct and fulfil the real purpose of payments, so that the use of foreign currency is legal.
At the close of the panel discussion, the Acting Governor of the Bank of the Lao PDR, Ms Vatthana Dalaloy, called for cooperation from all those involved in complying with legislation to ensure the effective regulation of foreign currency.
She also called on the media to play an active role in persuading members of the public to use the kip instead of foreign currency.

By Times Reporters   
 (Latest Update September 2, 2024)