Central bank governor campaigns on use of kip

Bank of the Lao PDR Governor Phouphet Khamphounvong on Friday urged all Lao people to use the kip.

He was speaking at a press conference to mark the 40th anniversary of the bank's foundation day.

“I would like to appeal to my countrymen to implement the presidential decree on currency management. This decree encourages people to use and advertise prices of goods in Lao kip,” he said.

The Bank of the Lao PDR was established on October 7, 1968, in the former revolutionary stronghold of Huaphan province.

Mr Phouphet said if everyone used the kip, the national currency would acquire greater value - one of the conditions necessary for socio-economic development. He also said it was generally important for Lao people to use their own currency.

He said the media should play a greater role in the campaign to promote use of the kip. “The media should maintain publicity on this topic until people change their minds and use the kip more often,” he said.

Mr Phouphet said Lao people first began to use foreign currencies on a regular basis in 1997 when Laos and other Asian nations were embroiled in a financial crisis, which drove inflation to three digits. In the same year, the kip fell in value 10-fold, which made people lack confidence in the national currency.

At present, however, the kip is stable and enables the payment of all government expenditures.

Mr Phouphet said the bank had introduced several measures to boost confidence in the kip, including systems that enabled people to change money into kip more easily. At present, a person need only show their ID when changing money into an amount less than 20 million kip.

Over the past 40 years the bank had transformed its role and duties in accordance with the changing policies of the Lao People's Revolutionary Party, he said.

During the war for national liberation from 1951 to 1975, the bank issued its own currency, the kip, in the liberated zone, hoping to use the currency as a means to drive economic development in this zone.

The bank provided loans so state enterprises could purchase natural products, which people collected from forests, to sell to other countries. This enabled the revolutionary administration to import industrial goods.

At this time, the bank operated on two levels – as the central bank and as a special bank which provided services to revolutionary organisations in the liberated zone.

After the establishment of the Lao People's Democratic Republic in 1975, until 1989, the bank was allowed to hold a monopoly in the management of state and commercial banks in Vientiane . At this time the bank issued banknotes, provided loans to state enterprises and ensured the government could pay its debts. The bank's major transformation came when the Lao People's Revolutionary Party introduced the renovation policy in 1986, to allow private participation in the nation's development. The bank allowed the establishment of both state-owned and private banks.

At present, the bank's role is to develop policy to manage currency and loan distribution nationwide. The bank also works to maintain the stability of the kip, to ensure economic development progresses on a smooth path.

By Ekaphone Phouthonesy
(Latest Update October 6 , 2008)