Laos govt orders actions to regulate foreign currencies

VIENTIANE (Bernama-Xinhua): The Lao Prime Minister has ordered actions to regulate foreign currencies to ensure that more foreign exchange earned from exports and foreign investments enter the country, while simultaneously promoting the use of the Lao currency, reported Xinhua quoting a news report.

According to a Laophattana Daily News, the order was signed by Lao Prime Minister Sonexay Siphandone last Friday, aiming to increase the supply of foreign currencies, lead to de-dollarization, and create demand for the Lao kip.

The move comes at a time when Laos has been hit by skyrocketting inflation and high public debt, driven mainly by the depreciation of the Lao kip, said the report.

Under the new order, Laos' central bank, the Bank of the Lao PDR (BOL), has been told to improve the electronic payment system for financial transactions and to regulate the use of foreign currencies in special economic zones.

The Ministry of Finance was instructed that tax obligations and revenues can be collected in foreign currencies from exporters or business units that generate income in foreign currencies.

The Ministry of Industry and Commerce was ordered to develop an electronic system and to link or share data with the BOL and concerned sectors to regulate import and export activities.

Importers and exporters are required to hold specific bank accounts in Laos to process their financial transactions. They need to register with the Ministry of Industry and Commerce and transfer money earned from exports via the banking system and into specific accounts.

Exporters who want to keep their foreign currency abroad, in order to repay loans taken in other countries, need to seek permission from the BOL.

In addition, concerned sectors were told to regulate and inspect the inflow of foreign currencies earned from foreign investments and to regularly report the scenario to the BOL.

One of the main challenges for Laos is that actual foreign investment inflows through the banking system are much lower than the agreed value of registered capital investments, and this leads to an overall imbalance of payment in the country, according to the report.

The year-on-year inflation rate in Laos dropped to 28.64 per cent in June, down from 38.86 per cent in May, according to the Lao Statistics Bureau. - Bernama-Xinhua