The Asian financial crisis in 1997 badly affected the kip. Between June 1997 and early 1999, the kip, which is not freely convertible, fell more than eighty percent against the dollar. The banks are currently broke and inflation is running at around a hundred percent a year (up from 7.3 percent a few years before). Many Lao are suffering real hardship, as prices have gone up while salaries have remained the same.

A black market ( talat meut) in foreign currencies exists and until recently was more or less tolerated. However, the government has started a campaign against the "illegal changing of money" urging tourists to use banks and official exchange kiosks. The difference between the official and black-market rate is now so little that it hardly seems worth the risk of being caught. At the time of writing, the official exchange rate was 7600 kip to the US dollar, 195 kip to the Thai baht and 12,054 kip to the pound stirling.

Travellers' cheques are a convenient and safe way to carry your money, although it's wise to have a decent supply of American dollars and Thai baht in cash , especially if you intend to spend time in some of the remoter parts of the country. Before travelling into smaller towns, change enough money to get you through until the next major town, but bear in mind that you cannot change your kip back into dollars or baht when leaving the country - and that duty-free shops only accept dollars and baht. Major credit cards are accepted at many hotels, upmarket restaurants and shops in Vientiane. Cash advances on Visa cards, and less frequently MasterCard, are possible in Louang Phabang, Vientiane, Savannakhet and Pakxe. At present, you can't withdraw cash from ATMs in Laos.