A move by the Lao government to shut down money-changing shops in an effort to rein in rampant inflation has upset business owners, who say the move is crimping their businesses by making it more difficult to buy construction materials and consumer goods from neighboring Thailand.
Lao is a rather poor, landlocked country whose economy relies on such imports that aren’t produced domestically, and businesses typically need to exchange the Lao kip for Thai baht or U.S. dollars to transact business. Others keep the foreign currencies on hand as the kip continues to lose value.
The government has started to take dramatic steps to tame inflation that has reached nearly 40 percent and a steady depreciation of the kip that has raised the price of food and other essentials for daily life, forcing some people to get second jobs.
In November, the central bank ordered three quarters of the country’s currency exchange shops operated by commercial banks to close, and on Jan. 13 it ordered the remaining 113 shut. Apparently, many shops had not been following state banking regulations and gave their customers favorable exchange rates.
Now everyone needs to go to state-run banks to change money. This will also increase foreign currency reserves at national banks so the government can pay off its debt.
“The [central bank] ordered all of them to close, and if they want to reopen, they have to reapply and follow the rules and regulations of state banks,” said the owner of a currency exchange shop.
But people are now complaining that state banks have shorter hours, and that there are fewer state bank branches in rural areas. And that they aren’t getting as good an exchange rate as they did before at the privately-run money-changers.
A Lao economic expert said the central bank’s decision would especially affect those who order products from Thailand. Most banks and money-changers in Thailand don’t accept the kip, so if people can’t go to a state bank, they need to go to a third country to change money.
“The negative impact of the closing of private exchange shops is that businesses owners and Laotians will have hard time getting foreign currency exchange like the Thai baht and U.S. dollar because most of them go to Thailand to buy goods and merchandise,” said the expert, who requested anonymity so he could speak openly about the situation.
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