IMF Staff Concludes 2019 Article IV Consultation Mission to Lao P.D.R.
May 21, 2019
End-of-Mission press releases include statements of IMF staff teams that convey preliminary findings after a visit to a country. The views expressed in this statement are those of the IMF staff and do not necessarily represent the views of the IMF’s Executive Board. Based on the preliminary findings of this mission, staff will prepare a report that, subject to management approval, will be presented to the IMF’s Executive Board for discussion and decision.
- Natural disasters slowed Lao P.D.R.’s economic growth and accentuated the need to address structural vulnerabilities.
- Implementing comprehensive reform programs targeted towards strengthening fiscal governance will support reducing the public debt while creating fiscal space for inclusive development.
- Improving economic statistics is gaining momentum and these efforts need to continue to enhance transparency and better inform economic policy decision-making.
An International Monetary Fund (IMF) team led by Eteri Kvintradze visited
Lao P.D.R. from May 8 to May 22, 2019, to hold discussions in the context
of the country’s 2019 Article IV Consultation. At the conclusion of the
visit, Ms. Kvintradze made the following statement:
“Lao P.D.R.’s economic growth in 2018 slowed to 6.3 percent, mainly due to
natural disasters and a tragic dam collapse, and inflation remained low.
Going forward, growth is expected to remain strong supported by private
investment, electricity exports, and completion of the Kunming-Vientiane
railway project. Headline inflation is projected to remain moderate and
current account deficits will persist with high import demand.
“Risks to the outlook are tilted to the downside, mainly from external
factors. In an uncertain global environment, a sharper than expected
slow-down in China – Lao P.D.R.’s largest trading partner and FDI investor
– may reduce exports and decelerate FDI inflows. On the upside, faster
regional growth and deepening integration within the ASEAN will help boost
investment, trade, and tourism. Accelerated reform efforts could help to
mitigate these downside risks.
“Fiscal consolidation brought the fiscal deficit down to 4.4 percent of GDP
in 2018 from 5.5 percent in 2017 as part of the spending was diverted for
the natural disaster recovery needs and revenues underperformed. Going
forward, the government has committed to gradual fiscal consolidation
supported by comprehensive public financial management reforms which would
also strengthen fiscal governance. To this end, implementing a well-defined
medium-term revenue strategy, simplifying and broad-basing tax legislation,
and automating tax administration systems are ongoing reform priorities.
“More importantly, aligning spending priorities with Sustainable
Development Goals (SDGs) will help advance their inclusive development
objectives and strengthen budget accountability mechanisms. Greater
participation of women in the economy is needed to boost growth.
“The new Public Debt Management Law (2018) is a step forward in defining a
rules-based mechanism for contracting and guaranteeing public debt.
Consolidating the Ministry of Finance’s oversight powers over the public
debt and the timely development of a 5-year strategy for debt management
remains a priority. The government’s commitment to assessing and targeting
infrastructure projects with high social returns and financing these at
concessional terms to the extent possible would benefit debt
“The monetary governance framework is also being modernized. New laws for
the Bank of Lao P.D.R., Commercial Bank, and Payment Systems were all
adopted in 2018. The implementation of this new legal framework needs to be
supported by developing necessary regulations, clear guidance, and a
proactive communication strategy.
“Improving economic statistics is gaining momentum in Lao P.D.R., with the
authorities starting to publish fiscal data in 2018 and are gradually
improving the national accounts’ timeliness, breadth, and frequency.
Further efforts are needed to bring monetary and financial sector
indicators to regional reporting standards.”
The IMF team met with Deputy Prime Minister and Minister of Finance Somdy
Douangdy, Chair of Planning, Finance, and Audit Committee of the National
Assembly Vilayvong Boudakham, Governor of the Bank of Lao PDR Sonexay
Sithphaxay and other senior officials. The team also held discussions with
the Lao Women’s Union, development partners as well as representatives of
the private sector.
The IMF team would like to thank the government and the people of Lao
P.D.R. for their hospitality and wish them every success in their ongoing
efforts to raise economic growth and improve livelihoods.
IMF Communications Department
PRESS OFFICER: Ting Yan
Phone: +1 202 623-7100Email: MEDIA@IMF.org