Saturday, February 20, 2010

Money matters

Getting a wad of bills adding up to 700,000 is a bit unnerving—even if it is really only about C$90.

In Laos, the currency is “Kip” (LAK) and the few ATMs in Luang Prabang will only dispense a maximum of 700,000 at one time. For most Laotians, this would provide food for a family for quite a while, but it can disappear quickly when a typical tourist meal for two costs 110,000 Kip.

The US dollar is still the preferred standard here, and many costs are quoted in USD. If you have them, dollars are happily accepted; if not, an exchange rate converts the price to Kip. The rate varies but is generally (in February 2010) around 8,400 Kip to USD$1.

But how much is that in Canadian dollars? Checking for a rate online can give a ballpark figure, but ATM and bank fees can change the effective rate dramatically. Our Canadian bank charges C$5 for an international ATM transaction, and the Laotian bank charges an additional fee in Kip. For relatively small withdrawals, these charges will end up boosting the real exchange rate.

We check our bank statement online to see the actual amount debited to calculate a real rate, and it demonstrates why larger withdrawals make more sense. For example, the 500,000 Kip withdrawal on February 18 ended up being a debit of C$65.73 with a C$5 fee, so the effective rate was 7,069 Kip to C$1 (500,000/70.73). A withdrawal of 700,000 the next day was C$91.16 with the same C$5 fee, so the effective rate for those Kip was 7,279 to C$1.

A 10,000 Kip beer paid from the first withdrawal will be C$1.41, but C$1.37 from the second. This isn’t a big difference for a single beer, but the 3% on a guesthouse bill of 1,045,000 would be 31,350 Kip — enough to enjoy 3 beers.

A small inexpensive calculator helps us develop a sense of costs in Canadian dollars. I put the real rate into the calculator memory so I can use it to divide common prices in Kip. Renting two bikes for 35,000 Kip each is C$4.80; an 80,000 Kip massage for two is C$10.99; and an hour of Internet access for 6,000 Kip works out to C$0.82…

After a day or two, we seldom need the calculator. Mind you, it still feels strange to think nothing of spending 120,000 on a nice meal!