By 2001, the Lao GDP growth rate stood at 5.5%. Since the late 1980s, the government’s economic policy has been to move rapidly from a centralized, planned economy toward an open, liberalized, market-oriented economic system. The foreign exchange markets have been opened and the kip floats freely based on supply and demand in relationship to the exchange rate in the "parallel market." Formal exchange controls have been lifted.

In 1995, the Lao currency (kip) started to devaluate. The value of kip against US dollar fell from 726 kip per 1 USD in 1994 to 936 kip per 1 USD in 1995. In August 1999, kip reached its lowest point, being traded at a market price of 9,705 kip per 1 USD. After that critical point, the value of kip began to increase and stabilize. From January to October 2000, the exchange rate of kip against USD was bouncing in a narrow margin with the average rate of 7,894.4 kip per 1 USD. By April 2003, the exchange rate was at 10,660 kip per 1 USD.

The average consumer price index in Laos from 1988 to 1997 was 20.447%. After the Asian financial crisis erupted, the value of kip fell sharply. As a result, inflation rate rapidly increased. In 1998, the inflation rate reached a peak of 141,97%. In the third quarter of 1999, however, inflation began to ease. According to the Bank of Lao PDR, the average inflation rate of the year 2000 is 30%. In 2001, consumer price inflation was at 7.8%.