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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 sustainability.

“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
MEDIA RELATIONS

PRESS OFFICER: Ting Yan

Phone: +1 202 623-7100Email: MEDIA@IMF.org