Wednesday, February 1, 2012

Laos: New 100,000 Kip banknote

New Laos 100,000 Kip banknote

The Bank of the Lao PDR will issue a 100,000 Kip banknote early February in a bid to encourage more people to use the national currency. Speaking at a press conference in Vientiane yesterday, Currency Issuing Department Director General Mr Souphat Khotnhotha said the main purpose of putting the 100,000 kip note in circulation was to make it easier for people to make cash payments.

With the proliferation of trade, frequent cash transactions are becoming an increasing necessity. “With 100,000 kip banknotes, people won’t need to carry so many notes around with them to pay for goods and services,” he said, adding that many people prefer to use foreign currencies as they are easier to carry. At present, the highest value kip banknote is 50,000 kip (US$6) while the highest value Thai baht banknote is 1,000 baht (US$32).

Mr Souphat said the new 100,000 kip note is worth US$12, and this higher value will encourage more Lao people to use their national currency. Economists say the Bank of the Lao PDR will find it easier to manage money supply and keep foreign exchange rates stable if everyone uses the kip in cash transactions.

In response to public concerns that inflation would rise with such a large banknote in circulation, Mr Souphat said it would not result in an increase in money supply. “The supply of money will remain unchanged,” he said. He explained that the presence of the 100,000 kip note would not put any more money into people’s pockets so there was no need to worry about a rise in inflation. He also said the Bank of the Lao PDR would ensure that circulation of both small and large denomination banknotes was sufficient to enable people to pay for goods and services of varying prices. The new banknotes have been printed overseas, and contain a security feature that prevents them from being counterfeited.

Many people have complained about the short supply of small denomination banknotes in circulation, which they need to give as small change. They also said the shortage led to inflation because vendors set prices based on the availability of banknotes. Bank of the Lao PDR officials say that traditional merit-making ceremonies are partly to blame, because so many notes are damaged in the process and it is impossible for the bank to ensure a constant supply of small denomination notes. They said the cost of printing both small and large denomination banknotes was similar, and that constantly having to print more small notes was a costly undertaking.

Source: Vientiane Times

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