Country Report Laos June 2009

Outlook for 2009-10: Exchange rates

Although it has depreciated in recent months, falling to around K8,520:US$1 in early June from K8,450:US$1 at end-2008, the kip remains strong against the US dollar, having appreciated from K9,346:US$1 at end-2007. Owing to the importance of Thailand as a trading partner, the Lao authorities have generally been keen to prevent dramatic shifts in the kip's value against the Thai baht. However, the kip has gained ground against the baht recently, in line with that currency's depreciation against the US dollar. The kip will be subject to downward pressure in the next year or so as a consequence of Laos's large budget deficit and the continued deficit on the current account. The authorities will welcome a steady depreciation of the currency as a means of propping up exports.

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