Since the establishment of the Lao PDR in 1975, the country has experienced periods of both currency stability and instability with related fluctuations in inflation. As part of the New Economic Mechanism introduced in 1986, the policy was to have a single exchange rate determined by market forces. During the early and mid-1990s the Lao PDR achieved impressive macroeconomic stability. However, contagion from the Asian economic crisis, especially in neighboring Thailand, eventually affected the Lao PDR dramatically in 1998 and 1999. The Lao currency at one point was worth only one-tenth of its previous value. It has since improved to be worth about one-seventh of its previous value. This led to 87.4 percent inflation in 1998 and 134 percent inflation in 1999.
In the year 2000 the currency stabilized and inflation fell to 33 percent. Monetary policy is implemented by the Bank of the Lao PDR, but it is certainly directly influenced by economic policies of the Party and Government.
|Exchange rates: Laos|
|new kips (K) per US$1|
|SOURCE : CIA World Factbook 2001 [ONLINE].|