VIENTIANE, June 17 (Xinhua) -- The Lao central bank, Bank of the Lao PDR (BOL), will limit the functions of currency exchange units across the country as part of efforts to regulate foreign currencies and stabilize the value of the kip.
Under the new policy, money changers will be banned from trading in foreign currencies with organizations and companies, the local daily Vientiane Times reported on Friday.
"Currency exchange units will only be allowed to change money for individuals and tourists, up to a maximum 15 million kip per person per day," Governor of BOL Sonexay Sitphaxay told the National Assembly on Wednesday.
The move supports the government's attempts to give commercial banks a greater role in the purchase and sale of foreign currencies for importers, exporters, investors and other legal entities, while limiting the role of money exchange units in currency trading.
The sale and purchase of foreign currencies, mainly the Thai baht and U.S. dollar, currently mainly take place through money exchange units because of trading restrictions imposed by commercial banks and the growing disparity between official exchange rates and the parallel market rate.
If commercial banks are given more authority and flexibility, it is envisaged that more foreign currency will flow into the banking system. It is also expected that commercial banks will operate more exchange units across Laos.
Sonexay said the central bank was working with the Ministry of Public Security to investigate target groups and address all forms of unlawful currency trading.
As many currency exchange units are now linked to commercial banks, the banks are required to monitor their operations.
The BOL governor said it was essential to revise the regulations around the management of foreign currencies and promote wider use of the kip in trade.
The depreciation of the kip is fundamentally linked to a supply-demand mismatch, Sonexay said, explaining that the supply of foreign currency had not decreased but demand had increased significantly because of the surge in fuel prices and volume of imported goods.
To stabilize the kip, the central bank has issued bills worth 5 trillion kip, which are on sale starting on Wednesday at commercial banks.