Historical Sketch

In the early 18th century, the Laotian empire of Lan Xang which had existed since the late 14th century split into the three separate kingdoms of Luang Prabang, Vientiane (Viengchang) and Champasak. Under the threat from neighboring Siam first Luang Prabang accepted a French protectorate, followed by Vientiane shortly afterwards. Champasak remained under Siamese suzerainty until 1904 when it also became French. The Laotian territories were integrated separately into French Indochina with the king of Luang Prabang as nominal ruler. The unification into a single state was proclaimed by the Lao Issara liberation movement after the end of the Japanese occupation during World War II. Within a year the Lao Issara were defeated by the French, who restored colonial rule over a now single Lao state in 1947. In 1953, the Kingdom of Laos attained independence. In the 1960s, it got dragged into the Vietnam War, which triggered a civil war that culminated in the overthrow of the monarchy and proclamation of the People's Democratic Republic in 1975.

Monetary History Overview

Traditionally, the Lao economy has been based on silver. In transactions bullion was used, coins were not produced. Due to the remoteness of the landlocked territory foreign trade coins did not enter in significant amounts. After the establishment of the French protectorate, the Indochinese Piastre was introduced instead of a distinct currency.

A year after independence, the Kingdom of Laos introduced the 1st Laotian Kip as national currency replacing the Indochinese Piastre at par. The Kip repegged to the US Dollar in 1958 when French initiated its currency reform. Shortly afterwards followed a first devaluation by more than 55%, another one in 1964 by 66%. As the country got more and more dragged into the Vietnam War, its economy and currency began declining. The Kip lost another 80% of its value in the first half of the 1970s. The Vietnam War had also triggered a civil war in Laos, in which the Pathet Lao defeated their opponents and took power in December 1975. Half a year later, a currency reform was carried out, and the 2nd Laotian ("Liberation") Kip became the new unit. At the banknote exchange cash holdings were partially withheld as state loans, thus effectively confiscated. Within two years, the new currency lost 85% of its value, and in December 1979, it was devalued another 75% and replaced by the 3rd Laotian (New) Kip. The initial devaluation was partly reverted in January 1980, but the official rate was effectively inoperative. In 1988, the Laotian economy was gradually liberalized, and the Kip's official rate got abolished and replaced by a floating effective rate. In the early 1990s, the Kip stabilized until it got severely hit by the South East Asian currency crisis of the late 1990s. In 2002, after more than 90% of the currency value had been destroyed due to the crisis, the Kip began to stabilize again and has remained so since then.

Laos joined the International Monetary Fund (IMF) on 05.07.1961.

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