## _cr1144

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### Executive summary and key economic developments
- GDP growth in 2009: 7.6 percent.  
- Inflation (end-period, 2009): 4.9 percent.  
- Growth drivers in 2009: rapid expansion of the mining and hydropower sectors; expansionary fiscal and monetary policies.  
- Fiscal deficit in FY09 (October 2008–September 2009): 7.2 percent of GDP (rose 4.4 percentage points).  
- Private sector credit growth: 87 percent y/y in March 2010; 88 percent in 2009.  
- Banking system net foreign assets (NFA): fell from US$1 billion in May 2008 to US$670 million in March 2010.  
- Gross international reserves of the Bank of Lao P.D.R. (BoL) around US$630 million in 2009 (Bolstered by IMF SDR allocation of US$65 million and sales of U.S. dollar-denominated BoL securities to domestic banks of US$43 million).  
- Gross foreign assets of the banking system cover only 51 percent of banking system liabilities (as of the period described).  
- Real estate and land prices: appear to be rising rapidly.

### Balance of payments and reserve adequacy
- BoL gross reserves coverage (BoL estimate): 5.4 months of current-year imports at end-2009.  
- Staff methodological adjustments: use IMF Direction of Trade Statistics partner-country trade data; add estimates of nonfactor services imports; deduct imports of goods by the resource sectors; express reserves in months of next-year imports.  
- Staff-calculated relevant imports of goods and services and reserve coverage (2006–09):  
  - 2006: Relevant imports 1,333; Gross reserves in months of current-year imports (BoL calc) 3.8; Staff gross reserves in months of next-year imports 3.0.  
  - 2007: Relevant imports 1,586; BoL calc months 6.0; Staff months 4.1.  
  - 2008: Relevant imports 2,272; BoL calc months 5.4; Staff months 3.4.  
  - 2009: Relevant imports 2,343; BoL calc months 5.4; Staff months 3.2.  
- Banking system liquid gross foreign assets: declining since early 2008; currently cover currency in circulation (CIC) plus about 35 percent of bank deposits (chart referenced).  
- Gross reserves relative to short-term external debt: equivalent to 227 percent of short-term external debt on a remaining maturity basis (116 percent if short-term trade credit—assumed at 10 percent of imports of goods and services—is included).

### Recent macroeconomic outlook and short-term projections
- GDP growth projected for 2010: remain close to 8 percent.  
- Inflation projection: recede to 5½ percent by end-2010.  
- Fiscal deficit projection FY2010: narrow to 4.9 percent of GDP.  
- Private sector credit projection for 2010: projected to exceed 50 percent of GDP in the absence of further measures (government target ~25 percent).  
- Projected banking system NFA by end-2010 under continued credit expansion: just over US$500 million.  
  - At that level NFA would cover 67 percent of reserve money and 23 percent of broad money.  
- Projected BoL gross reserves in baseline: about US$556 million (decline in absence of one-off boosts like SDR allocation and sale of BoL foreign currency securities).

### Medium-term framework, projections, and risks
- Draft seventh five-year plan (2011–15): annual average growth target 8 percent; investment target 30 percent of GDP.  
- Selected staff projections (2007–15):  
  - Real GDP growth: 2007 7.8; 2008 7.8; 2009 7.6; 2010 proj. 7.7; 2011 proj. 7.5; 2012 proj. 7.3; 2013 proj. 6.4; 2014 proj. 7.6; 2015 proj. 9.3.  
  - Real GDP growth excluding resource projects: 2007 5.0; 2008 6.5; 2009 5.3; 2010 proj. 6.2; 2011 proj. 6.3; 2012 proj. 6.4; 2013 proj. 7.3; 2014 proj. 7.2; 2015 proj. 7.5.  
  - Consumer prices (end-period): 2007 5.6; 2008 3.2; 2009 3.9; 2010 proj. 5.5; 2011 proj. 5.7; 2012 proj. 5.2; 2013 proj. 4.1; 2014 proj. 3.5; 2015 proj. 3.5.  
  - Overall fiscal balance (percent of GDP): 2007 -2.7; 2008 -2.8; 2009 -7.2; 2010 proj. -4.9; 2011 proj. -2.4; 2012 proj. -1.3; 2013 proj. -1.5; 2014 proj. -1.8; 2015 proj. -1.9.  
  - Current account balance (percent of GDP): 2007 -15.9; 2008 -18.5; 2009 -17.6; 2010 proj. -10.2; 2011 proj. -13.6; 2012 proj. -15.4; 2013 proj. -19.9; 2014 proj. -25.8; 2015 proj. -19.9.  
  - Gross official reserves (US$ millions): 2007 528; 2008 636; 2009 632; 2010 proj. 555; 2011 proj. 551; 2012 proj. 699; 2013 proj. 823; 2014 proj. 993; 2015 proj. 1,168.  
  - In months of imports (excluding large-project imports): 2007 2.8; 2008 3.3; 2009 2.8; 2010 proj. 2.0; 2011 proj. 1.8; 2012 proj. 1.9; 2013 proj. 1.9; 2014 proj. 2.3; 2015 proj. 2.7.  
- Staff updated DSA: Lao P.D.R. continues to have a high risk of debt distress.  
  - External debt stock indicators: two of three continue to exceed policy-dependent indicative threshold levels over the medium term under the baseline.  
  - External debt service indicators: do not breach relevant thresholds under the baseline and stress tests (reflecting high concessionality of external debt).

### Financial sector soundness and vulnerabilities
- Rapid expansion of banks and credit growth poses risks to financial stability.  
- Reported NPL ratios remain low but risk of later-stage increase during credit boom.  
- Capitalization of the three state-owned commercial banks: remains below prudential limits.  
- Commercial banks net foreign exchange position: net long position about 2 percent of GDP.  
- Some banks are exceeding prudential limits on net open position.  
- Currency mismatches in the nonbank private sector: may be substantial, with many borrowers in foreign currency lacking foreign currency income.

### Policy discussions and recommendations (near term)
- Near-term priorities to maintain macroeconomic stability and stem decline in banking system NFA:  
  - Keep the overall fiscal deficit on a consolidation path.  
  - Reduce growth of credit to the private sector toward government target of about 25 percent.  
- Fiscal policy specifics:  
  - Projected FY2010 fiscal deficit of 4.9 percent of GDP regarded as appropriate consolidation.  
  - Assumptions underpinning FY2010 projection include continuation of strong revenue collection pushing domestic revenue to 15.5 percent of GDP (from 14.9 percent of GDP in FY2009) and phasing out direct BoL lending to local governments.  
  - BoL disbursed about 2 percent of GDP during the first six months of FY2010; off-budget capital spending projected to decline to about 3.1 percent of GDP in FY2010 (down from 4.1 percent of GDP in FY2009).  
- Monetary policy and prudential measures suggested:  
  - Articulate a plan to reduce private sector credit growth; staff suggested raising reserve requirements, raising the policy rate, sales of central bank securities, and moral suasion. Authorities favored moral suasion.  
  - Consider prudential curbs, particularly for private banks and branches of foreign banks with lax lending standards.  
  - BoL’s plan to sell kip-denominated BoL securities welcomed; consideration to raise interest rates on these securities to enhance attractiveness.  
  - Staff recommended enforcing prudential limits on net open foreign currency positions and prohibiting foreign-currency lending to borrowers without foreign currency income (phased enforcement suggested).

### Fiscal policy: medium-term consolidation and debt management
- Overall fiscal deficit should be put on a medium-term consolidation path, building on recent revenue gains and phasing out off-budget spending, while strengthening expenditure management.  
- The overall fiscal deficit including grants should not exceed concessional external financing (net), projected at about 2.4 percent of GDP in FY2011.  
- Recourse to nonconcessional foreign financing should be strictly limited to viable projects.  
- Staff suggestions to achieve consolidation include:  
  - Stop new BoL lending to local government outside the budget for infrastructure projects; bring all infrastructure development projects on-budget and prioritize projects to match financing.  
  - Articulate plans to repay BoL loans through the central government budget starting with the FY2011 budget; consider using Treasury Bonds issuance to repay BoL loans.  
  - Complete VAT introduction by increasing number of registered companies filing VAT returns and clarify VAT treatment for natural resources companies.  
  - Full implementation of a treasury single account (TSA) system.

### Financial sector supervision and SOCB recapitalization
- Restructuring program for SOCBs continues and showing results for one of three banks; capitalization improved but remains below regulatory minimum.  
- Recommend linking SOCB recapitalization to memoranda of understanding with structural conditions and performance criteria.  
- Implementation decrees for commercial banking law issued; institutional framework for banking supervision improved.  
- Staff suggested considering raising the collective provisioning requirement (present rate 0.5 percent).  
- Enforcement of prohibition on bank supervisors taking positions in commercial banks within two years welcomed.

### External accounts, REER assessment, and implications
- REER is now 17 percent more appreciated than the 2007 average.  
- Four quantitative approaches indicate REER stronger than implied by fundamentals; degree of misalignment varies from 1 to 69 percent depending on method.  
- Using CGER-based trade elasticity (0.19) suggests kip is overvalued by 48 and 69 percent under ES and MB approaches, respectively; using Lao-specific trade elasticity (0.38) suggests a considerably smaller overvaluation.  
- Foreign direct investment inflows projected at about 18 percent of GDP in 2015 (Table 2).  
- Assuming an import content of 60 percent, current account deficit excluding FDI-financed imports would be only about 2 percentage points of GDP higher than current account norm according to MB approach; accordingly, kip would be overvalued by 5 percent.  
- Overvaluation underscores importance of tighter fiscal and monetary policy alongside structural reforms.

### Debt sustainability analysis — headline DSA findings
- Results similar to previous DSA but improved revenue and export outlook lowered some debt-burden indicators.  
- PV of external PPG debt at end-2009: 43 percent of GDP; 129 percent of exports.  
- Stock of external PPG debt (end-2009): Total US$3.1 billion; 55.5 percent of GDP.  
  - Multilateral US$2.056 billion; 36.7 percent of GDP.  
  - Bilateral US$0.953 billion; 17.0 percent of GDP.  
  - Commercial US$0.13 billion; 1.8 percent of GDP.  
- Private external debt at end-2009: 46 percent of GDP (mostly mining, hydropower, and construction).  
- Domestic public debt at end-2009: 6.1 percent of GDP (up from 3.0 percent at end-2008), driven by BoL direct lending to local governments: kip 1,628 billion (US$192 million or 3.4 percent of GDP) added in 2009.  
- Total PPG domestic and external debt in 2009: 61.5 percent of GDP.  
- Under baseline, three public external debt stock indicators remain above policy-dependent thresholds in the first part of the projection period but decline from 2010 onward.  
- Stress tests: depreciation of the nominal exchange rate and lower export growth are the most damaging shocks (e.g., one-off 30 percent depreciation sharply raises PV of debt-to-GDP and PV of debt-to-revenue).  
- Policy recommendations from DSA: obtain external borrowing on concessional terms; carefully manage fiscal and quasi-fiscal liabilities; continue prudent debt management; strictly limit nonconcessional external financing to viable projects; improve debt management capacity and disclosure.

### Box 1 — Baseline scenario (2010–30) — key assumptions and projections
- Real GDP growth: projected to average 7.6 percent in 2010–15; moderate to 6.6 percent on average in 2016–30.  
- Nam Theun II 1,070 MW hydropower station assumed to start operations in March 2010.  
- Inflation: projected about 5 percent during 2010–11; moderate to 3 percent over the longer term.  
- External financing: assumed largely concessional over the medium term; commercial disbursements relatively small.  
- Fiscal consolidation: deficit projected to narrow from 7.2 percent of GDP in FY09 to about 4.9 percent in FY10 and decline further thereafter.  
- Selected numerical projections: real GDP growth and inflation assumptions consistent with staff projections; nominal GDP projections and PV debt ratios presented in DSA tables.  
- Stress tests included A1, A2, B1–B6 with outcomes showing vulnerability to large nominal depreciation and export shocks.

### Data quality, statistics, and staff appraisal
- Data gaps and delays: absence of timely data across sectors impedes analysis; delays in monetary statistics due to new chart of accounts; gaps in balance of payments and fiscal reporting.  
- Recommendations: dedicate sufficient resources to data collection and compilation; enhance coordination among statistical agencies; participation in IMF’s GDDS could help; passage of draft Statistics Law expected to strengthen National Department of Statistics.  
- Staff appraisal: Lao P.D.R.’s economy held up well despite global recession; expansionary policies have put pressure on the balance of payments and reduced banking system NFA since mid-2008; medium-term prospects promising if macroeconomic stability preserved; staff welcomes authorities’ acceptance of obligations under Article VIII, Sections 2, 3, and 4.

### Fund relations and institutional notes (ANNEX I)
- Membership Status: Joined 7/05/61; Article VIII.  
- Quota: 52.90 SDR million; Fund holdings of currency: 52.90 SDR million.  
- SDR Department net cumulative allocation: 50.68 SDR million; Holdings: 51.07 SDR million.  
- Outstanding Purchases and Loans: PRGF Arrangements 8.15 SDR million; Percent Quota 15.41.  
- Projected obligations to Fund (SDR million): 2010 Principal 1.81; 2011 Principal 3.17; 2012 Principal 2.27; 2013 Principal 0.91; 2014 Principal 0.00.  
- Exchange Arrangement: de jure managed float; de facto stabilized. On May 28, 2010, Lao P.D.R. accepted obligations under Article VIII, Section 2, 3, and 4.  
- Technical assistance during past 18 months: STA Government Finance Statistics (May 2009); FAD peripatetic expert in customs administration.  
- Resident representation: Senior Resident Representative for Vietnam and Lao P.D.R. based in Hanoi; local IMF office in Vientiane closed July 2010.

### Millennium Development Goals indicators (selected)
- Life expectancy at birth (years): Lao PDR: 55 (2004), 56 (2005).  
- Infant mortality (per 1,000 live births): Lao PDR: 77 (2000), 70 (2005).  
- Maternal mortality (per 100,000 live births): Lao PDR: 405 (2005).  
- Child malnutrition, weight for age (% of under 5): Lao PDR: 40 (2000), 38 (2006).  
- Access to improved water source (% of population): Lao PDR: 51 (2004), 58 (2006).  
- Access to improved sanitation facilities (% of population): Lao PDR: 30 (2004), 45 (2006).  
- Literacy (% of population age 15+): Lao PDR: 73 (2005), 84 (2005).  
- Primary completion rate, total (% of relevant age group): Lao PDR: 74 (2004), 76 (2005).

*Source: IMF staff report text and accompanying DSA and annexes as provided in content unit _cr1144.*

### 1.   Measures of Reserve Adequacy .....................................................................................5

### 1.   Measures of Reserve Adequacy

### Executive summary and key economic developments
- GDP growth in 2009: 7.6 percent.
- Inflation (end-period, 2009): 4.9 percent.
- Growth drivers in 2009: rapid expansion of the mining and hydropower sectors; expansionary fiscal and monetary policies.
- Fiscal deficit in FY09 (October 2008–September 2009): 7.2 percent of GDP (rose 4.4 percentage points).
- Private sector credit growth: 87 percent y/y in March 2010; 88 percent in 2009 (text also cites 88 percent in 2009 and 87 percent y/y March 2010).
- Banking system net foreign assets (NFA): fell from US$1 billion in May 2008 to US$670 million in March 2010.
- Gross international reserves of the Bank of Lao P.D.R. (BoL) around US$630 million in 2009 (Bolstered by IMF SDR allocation of US$65 million and sales of U.S. dollar-denominated BoL securities to domestic banks of US$43 million).
- Gross foreign assets of the banking system cover only 51 percent of banking system liabilities (as of the period described).
- Real estate and land prices: appear to be rising rapidly.

### Balance of payments and reserve adequacy concerns
- BoL gross reserves coverage (BoL estimate): 5.4 months of current-year imports at end-2009.
- IMF staff methodology adjustments:
  - Use partner-country trade data from the IMF’s Direction of Trade Statistics.
  - Add estimates of nonfactor services imports.
  - Deduct imports of goods by the resource sectors.
  - Express reserves in months of next-year imports.
- Staff-calculated relevant imports of goods and services and reserve coverage (2006–09):
  - 2006: Relevant imports 1,333; Gross reserves in months of current-year imports (BoL calc) 3.8; Staff gross reserves in months of next-year imports 3.0.
  - 2007: Relevant imports 1,586; BoL calc months 6.0; Staff months 4.1.
  - 2008: Relevant imports 2,272; BoL calc months 5.4; Staff months 3.4.
  - 2009: Relevant imports 2,343; BoL calc months 5.4; Staff months 3.2.
- BoL gross foreign assets fell short of reserve money (Table 4 referenced).
- Banking system liquid gross foreign assets trend: declining since early 2008; now cover currency in circulation (CIC) plus about 35 percent of bank deposits (chart referenced).
- Gross reserves relative to short-term external debt:
  - Equivalent to 227 percent of short-term external debt on a remaining maturity basis (116 percent if short-term trade credit—assumed at 10 percent of imports of goods and services—is included).

### Recent macroeconomic outlook and projections
- GDP growth projected for 2010: remain close to 8 percent.
- Inflation projection: recede to 5½ percent by end-2010.
- Fiscal deficit projection FY2010: narrow to 4.9 percent of GDP (projected contribution to policy tightening).
- Private sector credit projection for 2010: projected to exceed 50 percent of GDP in the absence of further measures (government target ~25 percent).
- Projected banking system NFA by end-2010 under continued credit expansion: just over US$500 million.
  - At that level NFA would cover 67 percent of reserve money and 23 percent of broad money.
- Projected BoL gross reserves in baseline: about US$556 million (decline in absence of one-off boosts like SDR allocation and sale of BoL foreign currency securities).

### Medium-term framework and risks
- Medium-term growth targets in draft seventh five-year plan (2011–15): annual average growth of 8 percent; investment target 30 percent of GDP.
- Macroeconomic framework (selected projections, 2007–15):
  - Real GDP growth: 2007 7.8; 2008 7.8; 2009 7.6; 2010 proj. 7.7; 2011 proj. 7.5; 2012 proj. 7.3; 2013 proj. 6.4; 2014 proj. 7.6; 2015 proj. 9.3.
  - Real GDP growth excluding resource projects: 2007 5.0; 2008 6.5; 2009 5.3; 2010 proj. 6.2; 2011 proj. 6.3; 2012 proj. 6.4; 2013 proj. 7.3; 2014 proj. 7.2; 2015 proj. 7.5.
  - Consumer prices (end-period): 2007 5.6; 2008 3.2; 2009 3.9; 2010 proj. 5.5; 2011 proj. 5.7; 2012 proj. 5.2; 2013 proj. 4.1; 2014 proj. 3.5; 2015 proj. 3.5.
  - Overall fiscal balance (percent of GDP): 2007 -2.7; 2008 -2.8; 2009 -7.2; 2010 proj. -4.9; 2011 proj. -2.4; 2012 proj. -1.3; 2013 proj. -1.5; 2014 proj. -1.8; 2015 proj. -1.9.
  - Current account balance (percent of GDP): 2007 -15.9; 2008 -18.5; 2009 -17.6; 2010 proj. -10.2; 2011 proj. -13.6; 2012 proj. -15.4; 2013 proj. -19.9; 2014 proj. -25.8; 2015 proj. -19.9.
  - Gross official reserves (in millions of U.S. dollars): 2007 528; 2008 636; 2009 632; 2010 proj. 555; 2011 proj. 551; 2012 proj. 699; 2013 proj. 823; 2014 proj. 993; 2015 proj. 1,168.
  - In months of imports of goods and nonfactor services, excluding imports associated with large projects: 2007 2.8; 2008 3.3; 2009 2.8; 2010 proj. 2.0; 2011 proj. 1.8; 2012 proj. 1.9; 2013 proj. 1.9; 2014 proj. 2.3; 2015 proj. 2.7.
- Staff updated Debt Sustainability Analysis (DSA): Lao P.D.R. continues to have a high risk of debt distress.
  - External debt stock indicators: two of three continue to exceed policy-dependent indicative threshold levels over the medium term under the baseline.
  - External debt service indicators: do not breach relevant policy-dependent thresholds under the baseline and stress tests (reflecting high concessionality of external debt).

### Financial sector soundness and vulnerabilities
- Rapid expansion of banks and credit growth poses risks.
- Reported NPL ratios remain low but risk of later-stage increase during credit boom.
- Capitalization of the three state-owned commercial banks: remains below prudential limits.
- Commercial banks net foreign exchange position: net long position about 2 percent of GDP.
- Some banks are exceeding prudential limits on net open position.
- Currency mismatches in the nonbank private sector: may be substantial, with many borrowers in foreign currency lacking foreign currency income.

### Policy discussions and recommendations
- Near-term priorities to maintain macroeconomic stability and stem decline in banking system NFA:
  - Keep the overall fiscal deficit on a consolidation path.
  - Reduce growth of credit to the private sector toward government target of about 25 percent (from much higher growth rates).
- Fiscal policy:
  - Projected FY2010 fiscal deficit of 4.9 percent of GDP regarded as appropriate consolidation.
  - Assumptions underpinning FY2010 projection:
    - Continuation of strong revenue collection observed in first half of fiscal year, pushing domestic revenue to 15.5 percent of GDP (from 14.9 percent of GDP in FY2009).
    - Total on-budget spending broadly in line with original budget plan.
    - Phasing out of direct loan disbursements from BoL to local governments (decision not to enter into new lending commitments from September 2009 onward).
    - BoL disbursed about 2 percent of GDP during the first six months of FY2010; off-budget capital spending projected to decline to about 3.1 percent of GDP in FY2010 (down from 4.1 percent of GDP in FY2009).
- Financial system reforms and structural reforms:
  - Strengthen bank supervision and financial soundness.
  - Improve monitoring of credit quality and adopt a broader array of indicators of reserve adequacy.
  - Strengthen competitiveness and pursue legal and regulatory reforms associated with WTO membership to assist structural adjustment.
- Authorities’ stance:
  - Broad agreement with staff on need for policy tightening.
  - Authorities to balance support for growth with macroeconomic stability.
  - Concern about potential spillovers from European sovereign debt problems; called for additional vigilance.

*Source: IMF staff report text from “Measures of Reserve Adequacy” (content unit)._cr1144 - 1.   Measures of Reserve Adequacy*

### 12.      Staff noted that the overall fiscal deficit should be put on a medium-term

### _cr1144 - 12.      Staff noted that the overall fiscal deficit should be put on a medium-term

### Fiscal policy: medium-term consolidation and debt management
- Overall fiscal deficit should be put on a medium-term consolidation path, building on recent revenue gains and the phasing out of off-budget spending, while strengthening expenditure management.
- Given strong growth of credit to the private sector, large public debt, and to support the stabilized exchange rate regime, the overall fiscal deficit including grants should not exceed concessional external financing (net), which is projected at about 2.4 percent of GDP in FY2011.
- Recourse to nonconcessional foreign financing should be strictly limited to viable projects.
- Staff suggestions to achieve needed fiscal consolidation while balancing support for growth (largely building on reforms already initiated):
  - Stop new BoL lending to local government outside the budget for infrastructure projects (government’s September 2009 decision welcomed); bring all infrastructure development projects on-budget and prioritize projects to match available financing.
  - Articulate plans to repay BoL loans through the central government budget starting with the FY2011 budget; strengthened revenue performance would provide room to do so without crowding out key social expenditure programs.
  - BoL loans to local governments could be repaid using proceeds from Treasury Bonds issuance timed to coincide broadly with amortization payments to the BoL; staff’s medium-term fiscal projections implicitly assume this. Potential benefits: mop up banks’ excess liquidity and develop the government bond market. Authorities noted repayments to the BoL from the central government budget had already started on a small scale.
  - Complete VAT introduction by increasing number of registered companies that file VAT returns, continuing taxpayer and public education about the VAT, and strengthening auditing and enforcement.
    - Tax administration reforms, including issuance of unified tax payer identification numbers, need to be furthered by addressing capacity constraints.
    - VAT law denies refunds to natural resources companies, including mining companies; mining companies refuse to pay VAT on invoices on grounds operations are subject to specific contracts that set out taxes and exclude VAT. Staff recommended clarifying treatment of natural resources companies under the VAT law to companies, their suppliers, and tax collectors and auditors.
  - Expeditious full implementation of a treasury single account (TSA) system to modernize and strengthen the national treasury function and contribute to policy tightening by scaling down government deposits in commercial banks.

### Monetary and exchange rate policy
- Staff welcomed intention to reduce growth of credit to the private sector but urged concrete measures.
  - Target to reduce credit growth to 25 percent by end 2010 was welcomed but could be hard to achieve given strong private credit growth during Q1 2010.
  - Tentative staff calculations suggest that a deceleration of growth of private sector credit to 33 percent, everything else equal, could be sufficient to stabilize banking system NFA during 2010.
  - Banks still have considerable excess reserves; unclear how adjusted target would be achieved.
  - Staff suggested BoL take a multi-pronged approach: raise reserve requirement, signal policy tightening by raising the policy rate, and use moral suasion. Authorities favored moral suasion rather than higher reserve requirements.
  - Staff recommended considering prudential curbs, particularly for private banks and branches of foreign banks with lax lending standards.
- BoL plans to sell kip-denominated BoL securities to offset stimulus from remaining loan disbursements to local governments welcomed.
  - Sales expected to force banks to draw on reserves held with BoL and push down reserve money growth (Table 4).
  - Consideration should be given to raise interest rates on these securities to enhance attractiveness.
  - Staff welcomed BoL decision to refrain from selling U.S. dollar-denominated BoL securities to domestic banks.
- Exchange rate assessment and policy stance:
  - Staff believes the kip is overvalued (Box 3) but that a stabilized exchange rate regime remains the appropriate monetary anchor for Lao P.D.R.
  - BoL has limited monetary policy instruments and financial market development is at an early stage; stabilized exchange rate regime remains appropriate given these constraints.
  - Currency pegs and near-pegs are associated with higher risk of financial crisis and slower and more abrupt external adjustment; makes consistent fiscal and monetary policies more important.
  - Authorities aim to limit currency fluctuations vis-à-vis major currencies within +5 percent per annum and would not contemplate greater exchange rate flexibility to avoid undermining de-dollarization and fanning inflation.

### Financial sector issues and supervision
- Progress and remaining needs:
  - Restructuring program for the SOCBs continues for one of the three banks and is showing results: improvements in capitalization, governance, internal controls, and risk management; SOCBs’ improved financial position has revived intermediation activity.
  - Implementation decrees for the commercial banking law issued; institutional framework for banking supervision significantly improved.
  - Good progress in preparing for October 2010 evaluation by the Asia-Pacific Group on Money Laundering Activities.
- Risks from rapid banking expansion and high credit growth:
  - Rapid expansion of number of banks and high credit growth in many private banks poses risks to banking system health.
  - Recent decisive handling by BoL of an emerging run on a newer private bank in May commended, but events indicate risks from rapid banking sector development; need accelerated progress in upgrading bank supervision.
  - "Box-ticking" approach to licensing and supervision cautioned against; loan standards should be scrutinized and tightened if necessary.
  - Strict due diligence over new bank licensing recommended, including by BoL’s Financial Intelligence Unit.
  - Loan classification and provisioning should be rules-based rather than negotiated with BoL.
  - Staff suggested considering raising the collective provisioning requirement; present rate of 0.5 percent is low given strong credit growth amid untested credit-risk frameworks.
  - Caution about potential risks related to linkages between banks and developing service and entertainment sector (e.g., casinos).
  - Authorities noted NPLs remain low and onsite/offsite inspections occur regularly; requested assistance from AsDB-financed short-term experts and inquired about IMF assistance; staff indicated Fund could provide technical assistance and suggested considering an FSAP.
- SOCB recapitalization and safeguards:
  - Staff called on authorities to articulate plans to complete recapitalization of SOCBs; capital adequacy increased but remains below regulatory minimum.
  - Recommend linking recapitalization plans with memoranda of understanding setting structural conditions and performance criteria for disbursing capital, as with expired Governance Agreements.
  - Encourage continuation of independent audits of SOCBs.
  - Welcomed prohibition on bank supervisors taking positions in commercial banks within two years of leaving BoL; enforcement of prohibition important.
- Prudential regulation enforcement to support de-dollarization:
  - Staff recommended BoL start enforcing prudential regulations that (i) limit banks’ net open foreign currency position (NOP); and (ii) prohibit bank lending in foreign currency to borrowers without foreign currency income.
  - Phased enforcement suggested with existing assets and liabilities initially grandfathered.
  - Consistent enforcement across banks would shift new loans toward domestic currency, encourage banks to compete for kip deposits, cause higher interest rates on kip deposits, and encourage banks to buy customers’ foreign currency and sell it to BoL to observe NOP limits.
  - Enforcement would need to be supported by assurances about easy availability of foreign currency for banks and customers.
  - Authorities took note that enforcement could limit drain on NFA of banking system and be consistent with BoL’s de-dollarization policy.

### External accounts, REER assessment, and implications
- Box 3 findings on REER and external sustainability:
  - REER is now 17 percent more appreciated than the 2007 average.
  - Application of four quantitative approaches suggests REER stronger than implied by macroeconomic fundamentals; degree of misalignment varies from 1 to 69 percent depending on method used.
  - Using CGER-based trade elasticity for Lao P.D.R. (0.19) suggests kip is overvalued by 48 and 69 percent when applying the external sustainability (ES) and macro balance (MB) approaches, respectively.
  - Applying a Lao P.D.R.-specific trade elasticity (0.38) suggests the kip’s overvaluation is considerably smaller.
  - Foreign direct investment inflows are projected at about 18 percent of GDP in 2015 (Table 2).
  - Assuming an import content of 60 percent, current account deficit excluding FDI-financed imports would be only about 2 percentage points of GDP higher than current account norm according to MB approach; accordingly, kip would be overvalued by 5 percent.
  - Overvaluation underscores importance of tighter fiscal and monetary policy alongside structural reforms to narrow nonresource current account deficit over the medium term.

### Structural reforms and business climate
- Accelerate efforts to improve business climate and trade integration in light of ASEAN Free Trade Agreement tariff reductions and increased competition.
- Specific recommendations:
  - Operationalize and implement comprehensive strategic plan for reform options for state-owned enterprises promptly, using multilateral and bilateral expertise as needed.
  - Build on momentum for WTO accession preparations; address outstanding WTO Working Party issues related to pricing policy, customs valuation methods, sanitary and phyto-sanitary rules, and laws/regulations on intellectual property rights.

*IMF staff report content as provided.*

### 21.      Improving the quality and timeliness of economic statistics would strengthen

### 21.      Improving the quality and timeliness of economic statistics would strengthen

### Data quality and timeliness
- The absence of timely data across all sectors impedes analysis of recent trends.
- Increasing delays in monetary statistics associated with implementation of the new chart of accounts has been particularly worrisome.
- The absence of reliable balance of payment statistics and gaps in fiscal reporting are additional areas for improvement.
- Sufficient resources should be dedicated to data collection and compilation.
- Enhanced coordination among statistical agencies would improve data quality and consistency.
- Participation in the IMF’s General Data Dissemination System (GDDS) could help in this regard.
- The draft Statistics Law would enhance the mandate of the National Department of Statistics and facilitate an increase in staffing; passage appears imminent and is expected to contribute to a strengthening of macroeconomic statistics.
- The IMF stands ready to increase its technical assistance to Lao P.D.R.

### IV. STAFF APPRAISAL — macroeconomic performance and outlook
- Lao P.D.R.’s economy has held up remarkably well, despite the global recession.
  - The crisis had an impact on exports, nonregional tourism and capital inflows.
  - Supported by ongoing projects in the mining and hydropower sector as well as expansionary fiscal and monetary policies, growth has remained higher than the average for low-income countries in Asia.
  - Authorities managed to contain inflation below the average for low-income countries in Asia.
  - Important gains continue to be made in improving living standards and reducing poverty.
- Expansionary macroeconomic policies put pressure on the balance of payments.
  - Expansionary fiscal and monetary policies alongside the rapid growth of the banking system have stimulated domestic demand and imports.
  - In conjunction with the stabilized exchange rate regime, this has put NFA of the banking system on a downward trend since mid-2008.
  - As a result, the liquidity buffer to absorb external and internal shocks is now substantially less comfortable than during 2000–07 and the authorities should take this into consideration when assessing the adequacy of central bank reserves.
- The outlook for GDP growth in 2010 is favorable and inflation is likely to remain moderate, but pressures on the external position are likely to continue.
  - The projected narrowing of the fiscal deficit in FY2010 would make an important initial contribution to the needed policy tightening.
  - On current policies, the growth of credit is expected to remain strong, boosting domestic demand and imports, and raising risks in the financial sector.
- Fiscal policy recommendations:
  - The overall fiscal deficit, which looks set to narrow by about 2 percent of GDP in FY2010, should be kept on a consolidation path over the medium term.
  - Staff welcomes the phasing out of the off-budget spending financed by direct lending from the central bank to provincial governments.
  - The needed medium-term fiscal consolidation should build on recent revenue gains, including from the resources sector and the newly-introduced VAT, and a prioritization of infrastructure spending.
- Monetary and financial sector recommendations:
  - The authorities should articulate a plan aimed at reducing the growth of credit to the private sector.
  - The extent of the further decline in banking system NFA during 2010 will depend to a large degree on the authorities’ success in reining in private sector credit growth.
  - All available instruments should be considered, including raising reserve requirements, stepping up sales of central bank securities to the domestic banks, raising the policy rate, and using prudential curbs.
  - Staff believes that the kip is overvalued, but that a stabilized exchange rate regime remains the appropriate monetary anchor for Lao P.D.R.
  - Given the higher risk of financial crisis and slower and more abrupt external adjustment typically associated with pegs and near-pegs, and in light of the downward trend in NFA of the banking system, it is important to implement consistent fiscal and monetary policies.
  - The rapid expansion of the number of banks and the rapid growth of credit in many banks poses high credit risks and call for extra vigilance by bank supervisors.
  - Bank lending standards should be scrutinized and a tightening of these standards should be mandated, if deemed necessary.
  - Existing prudential regulations should be clarified and enforced, including loan classification rules and regulations which limit banks’ net open foreign currency position and prohibit bank lending in foreign currency to borrowers without foreign currency income.
- Medium-term prospects and structural reforms:
  - Lao P.D.R.’s medium-term prospects are promising, provided that a concerted effort is made to preserve macroeconomic stability.
  - Efforts to strengthen the soundness of the financial system should be complemented by efforts to improve the business climate and trade integration.
  - State-owned enterprise (SOE) reforms and regulatory and legal reform required for accession to WTO membership can be expected to have important long-run payoffs.
- Statistics: Improvements in the quality and timeliness of statistics would improve analysis and policy making; improvements in balance of payments and national account statistics are particularly urgent.
- Governance/commitments: Staff welcomes the authorities’ recent acceptance of the obligations under Article VIII, Sections 2, 3, and 4 of the IMF’s Articles of Agreement.

*Source: _cr1144 - 21.      Improving the quality and timeliness of economic statistics would strengthen*

### 32.      It is recommended that the next Article IV consultation with Lao P.D.R. take place on

### 32.      It is recommended that the next Article IV consultation with Lao P.D.R. take place on 

### Real and external sector developments
- Growth has remained strong, supported by large investments in the resource (mining and hydro) sector.
- Movements in the current account in recent years have been driven mostly by the resource sector.
- During April 2010, the kip appreciated by 2 percent against the U.S. dollar.
- The REER is 17 percent more appreciated than the 2007 average.
- Inflation is trending up, driven mostly by nonfood items.
- Seasonally adjusted, prices rose at a 4 percent annual rate during the past three months.
- Key high-frequency outcomes and projections:
  - Real GDP growth: 6.8 8.6 7.8 7.8 7.6 7.7 (years as presented)
  - CPI (annual average): 7.2 6.8 4.5 7.6 0.0 5.4 (years as presented)
  - CPI (end year): 8.8 4.7 5.6 3.2 3.9 5.5 (years as presented)
- Exports and imports:
  - Exports (in millions of U.S. dollars): 697 1,133 1,321 1,605 1,485 2,125 (years as presented)
  - Exports annual percent change: 30.1 62.6 16.6 21.5 -7.5 43.1 (years as presented)
  - Imports (in millions of U.S. dollars): 1,270 1,602 2,158 2,829 2,720 3,031 (years as presented)
  - Imports annual percent change: 20.3 26.1 34.7 31.1 -3.9 11.5 (years as presented)
- Current account balance:
  - In millions of U.S. dollars: -492 -398 -672 -985 -984 -647 (years as presented)
  - In percent of GDP: -18.1 -11.2 -15.9 -18.5 -17.6 -10.2 (years as presented)
- Gross official reserves (in millions of U.S. dollars): 238 336 528 636 632 555 (years as presented)
  - In months of prospective goods and services imports: 2.2 2.5 2.8 3.3 2.8 2.0 (years as presented)

### Fiscal developments
- The fiscal deficit widened in FY08/09 due to higher spending.
- Public sector debt is on a declining trend.
- Weaker copper prices have moderated the trend increase in resource-related revenues.
- The wage bill and domestically-financed capital spending rose sharply in FY08/09.
- Selected fiscal aggregates (fiscal year basis):
  - Revenue (percent of GDP): 12.1 12.5 13.9 14.4 14.9 15.5 (years as presented)
  - Of which: Resources: 0.9 2.0 2.7 3.3 2.3 2.6 (years as presented)
  - Grants (percent of GDP): 1.8 2.0 1.7 1.6 2.3 2.1 (years as presented)
  - Expenditure (percent of GDP): 18.3 17.4 18.3 18.7 24.4 22.5 (years as presented)
  - Current expenditure (percent of GDP): 10.2 10.1 10.2 11.5 12.9 12.6 (years as presented)
  - Capital and net lending (percent of GDP): 8.1 7.2 8.0 7.2 11.5 9.9 (years as presented)
  - Overall balance (including grants, percent of GDP): -4.4 -2.9 -2.7 -2.8 -7.2 -4.9 (years as presented)
  - Domestic financing (percent of GDP): -0.1 -1.2 -1.1 -0.3 5.0 3.1 (years as presented)
  - External financing (percent of GDP): 4.5 4.1 3.8 3.0 2.2 1.8 (years as presented)
- Public sector debt (percent of GDP) and composition shown in fiscal figures indicate domestic, external-commercial, external-bilateral, and external-multilateral components (detailed figures presented in charts and tables).

### Monetary and banking sector developments
- NFA of the BoL and the banks are both trending down.
- The August SDR allocation (US$65 million) supported gross reserves.
- Banks' NOP has remained above US$100 million (1.8 percent of GDP).
- The decline in NFA has limited the acceleration of reserve money growth and M2 growth, despite a credit boom.
- The loan-to-deposit ratio has been rising; banks have ample liquidity and the ratio could rise further.
- Deposit dollarization continues to inch down; lending dollarization stabilized since the onset of the global financial crisis.
- Rates on kip loans remain substantially higher than on forex loans.
- The flow of new credit peaked during the second quarter of 2009, spiked again in October and November, spearheaded by bank credit to the private sector.
- The flow of bank credit to SOEs has been limited, with the BOL stepping in instead.
- Monetary aggregates and indicators (selected):
  - Reserve money (annual percent change): 18.2 37.2 58.8 20.2 34.7 1.2 (years as presented)
  - Broad money (annual percent change): 7.7 30.1 38.7 18.3 31.3 25.0 (years as presented)
  - Bank credit to the economy (annual percent change): 7.6 -9.1 21.0 84.6 90.7 42.9 (years as presented)
  - On three-month kip deposits (end-of-period): 5.5 5.5 5.5 6.0 6.0 ... (years as presented)
  - On short-term kip loans (one year): 17.8 14.0 11.5 11.5 10.0 ... (years as presented)

### Monetary and external interactions
- The stability of the exchange rate and the interest rate premium have caused kip deposits to grow faster than forex deposits.
- Credit to the economy increased by 89 percent in March (y-o-y).
- World market prices of copper and gold have been very volatile.
  - Copper and gold price indicators are shown in U.S. dollars (time series presented).
- Import growth moved into positive territory (y/y); exports were still down 6 percent (y/y) in the period highlighted.
- Through August 2009, exports held up relatively well but the trade deficit has been widening.

### Selected macroeconomic aggregates and medium-term framework
- Table highlights (selected rows, values as presented):
  - GDP and prices (percentage change): Real GDP growth 6.8 8.6 7.8 7.8 7.6 7.7 (years as presented)
  - CPI (annual average): 7.2 6.8 4.5 7.6 0.0 5.4 (years as presented)
  - Public finances (percent of GDP): Revenue 12.1 12.5 13.9 14.4 14.9 15.5; Expenditure 18.3 17.4 18.3 18.7 24.4 22.5 (years as presented)
  - Balance of payments: Current account in millions of U.S. dollars -672 -985 -984 -647 -944 -1,148 -1,592 -2,253 -1,921 (series as presented)
  - External public debt (in millions of U.S. dollars): 2,203 2,351 2,521 2,949 3,109 3,270 (years as presented)
  - External public debt (percent of GDP): 80.8 66.0 59.7 55.5 55.5 51.6 (years as presented)
  - Gross official reserves (in millions of U.S. dollars): 528 636 632 555 551 699 823 993 1,168 (series as presented)
  - Nominal GDP at market prices: in billions of kip 28,948 35,981 40,467 46,215 47,567 53,727; in millions of U.S. dollars 2,726 3,564 4,226 5,313 5,598 6,341 (years as presented)

### Public finances — detailed operations (selected items)
- General government operations (in billions of kip, fiscal year basis):
  - Revenue and grants: 4,962 6,134 7,134 8,065 7,275 8,099 8,907 9,184 11,126 (series as presented)
  - Revenue (excluding grants): 4,266 5,460 6,439 7,313 6,276 7,030 7,825 8,103 9,963 (series as presented)
  - Resource revenue (components and totals) and grants displayed across years in the tables.
  - Expenditure: 5,938 7,192 8,368 9,881 11,058 11,501 10,105 11,738 12,505 (series as presented)
  - Overall balance (in billions of kip): -976 -1,058 -1,234 -1,816 -3,783 -3,403 -1,198 -2,553 -1,379 (series as presented)
  - Nonresource balance (in billions of kip): -1,655 -2,107 -2,721 -3,517 -5,121 -4,478 ... -3,900 -3,564 (series as presented)

### Monetary survey and banking sector (selected figures)
- Bank of Lao P.D.R. (BoL) net foreign assets (in millions of U.S. dollars): 4,803 5,457 5,230 5,012 4,967 4,690 4,555 4,613 4,088 3,933 (series as presented)
  - Corresponding values in millions of U.S. dollars: 510 632 614 585 583 551 537 546 482 464 (series as presented)
- Monetary survey highlights:
  - Net foreign assets (in millions of U.S. dollars): 7,779 7,932 7,368 7,301 6,859 5,835 5,500 5,649 4,650 4,367 (series as presented)
  - Net domestic assets and credit to the economy series presented, with credit to the economy reaching values such as 3,166 4,842 5,845 6,512 8,242 9,157 11,143 12,323 13,631 15,924 (series as presented)
  - Broad money series: 9,774 10,789 11,564 12,444 12,900 13,488 15,178 16,008 16,965 18,975 (series as presented)
  - Dollarization rate (FCDs/broad money; in percent): 54.5 53.2 50.4 49.4 50.2 48.7 46.1 46.7 44.4 43.3 (series as presented)

### Financial soundness indicators
- Capital adequacy ratio (Basel I) and bank-level indicators reported as of March 10, 2010.
  - Capital adequacy ratio (Basel I): ... 25.0 20.1 21.6 (series as presented)
  - NPL ratio: 5.9 5.4 3.8 3.8 (series as presented)
  - Number of banks: 13 20 23 23 (series as presented)
  - Sectoral allocation of bank credit (in percent of total) reported for industry, commerce, services, agriculture, and other sectors (detailed breakdown presented).

### Debt sustainability assessment (Joint IMF/World Bank DSA)
- Assessment approved July 14, 2010, by IMF and IDA staff named in the report.
- Lao P.D.R.’s risk of debt distress is assessed to be high.
- Two public external debt stock indicators are expected to remain above policy-dependent indicative thresholds over the medium term, despite a recent downward trend in debt indicators and projected strong growth.
- Debt service ratios remain comfortably within policy-dependent indicative thresholds, even under stress tests, due to the high level of concessionality of official borrowing.
- Policy implications emphasized:
  - Continued prudent debt management, including management of quasi-fiscal liabilities.
  - Cautious assessment and monitoring of large-scale projects to mitigate risks to external and public debt sustainability.

*Sources: Data provided by the Lao P.D.R. authorities; IMF staff estimates and projections; Joint IMF/World Bank Debt Sustainability Analysis (July 14, 2010).*

### 1. The results of this DSA are similar to those of the previous DSA

### 1. The results of this DSA are similar to those of the previous DSA

### Key findings and headline results
- The results of this DSA are similar to those of the previous DSA but the improved outlook for revenue and exports has lowered related debt-burden indicators.
- The primary difference is that the present value (PV) of debt to exports ratio no longer exceeds the threshold level beyond the first projection year under the baseline scenario.
- The lower discount rate—4 percent, down from 5 percent in the 2009 DSA—raises the PV of external debt across the board.

### Policy-dependent thresholds and institutional assessment
- Lao P.D.R.’s three-year average CPIA: 3.21, placing it in the “weak performer” category (three year average CPIA below or at 3.25).
- Relevant indicative thresholds for this category:
  - PV of debt-to-GDP ratio: 30 percent
  - PV of debt-to-exports ratio: 100 percent
  - PV of debt-to-revenue ratio: 200 percent
  - Debt service-to-exports ratio: 15 percent
  - Debt service-to-revenue ratio: 25 percent
- These thresholds apply to public and publicly-guaranteed external debt.

### External PPG debt levels and composition (end-2009)
- PV of external PPG debt at end-2009: 43 percent of GDP; 129 percent of exports.
- Stock of external PPG debt:
  - Total: US$3.1 billion; 55.5 percent of GDP
  - Multilateral: US$2.056 billion; 36.7 percent of GDP; 66 percent of external PPG debt (mainly AsDB 37 percent and IDA 22 percent)
  - Bilateral: US$0.953 billion; 17.0 percent of GDP; about 31 percent held by Russia, China, Thailand, and Japan
  - Commercial (nonconcessional): US$0.13 billion; 1.8 percent of GDP
- Private external debt at end-2009: 46 percent of GDP (mostly mining, hydropower, and construction).
- Notes: The Soviet-era debt owed to the Russian Federation is assumed to be serviced from 2011 onward in this DSA (unlike last year’s no-repayments assumption).

### Trends and dynamics in external debt
- External PPG debt declined from 82 percent of GDP in 2005 to 55 percent of GDP at end-2009, while nominal external PPG debt increased from US$2.2 billion to US$3.1 billion over the same period.
- Under the baseline, the three public external debt stock indicators remain above the policy-dependent indicative thresholds in the first part of the projection period, but all three are projected to decline from 2010 onward.
- Debt service ratios (as a share of exports and government revenues) remain well below indicative thresholds throughout the 20-year projection period despite falling concessionality.

### Domestic public debt (end-2009) and dynamics
- Recorded domestic public debt at end-2009: 6.1 percent of GDP (up from 3.0 percent of GDP at end-2008).
- Increase driven mainly by Bank of Lao P.D.R. (BoL) direct lending to local governments: kip 1,628 billion (US$192 million or 3.4 percent of GDP) added to domestic debt in 2009.
- Total PPG domestic and external debt in 2009: 61.5 percent of GDP.
- BoL lending to local governments expected to peak in 2010 with total commitment of over kip 3 trillion likely fully disbursed by September and repayments from the central government budget kicking in.
- Domestic debt projected: 6.7 percent of GDP in 2010 (from 6.1 percent in 2009), then decline to 1.8 percent of GDP in 2015.

### Baseline macroeconomic assumptions and growth outlook
- Baseline projects annual average growth for the next six years at 7.6 percent, in line with the average for the last five years and slightly below authorities’ draft seventh five-year plan (2011–15).
- Growth drivers: large resource projects (mostly mining and power), expansion of tourism and construction (nontradable sector), followed by agriculture and manufacturing (nonresource tradable sector).
- Baseline assumes global recovery bringing forward previously delayed projects; higher growth, revenues, and exports relative to previous DSA.

### Vulnerabilities and stress-test results
- Most severe vulnerabilities:
  - Depreciation of the nominal exchange rate and lower export growth are the most damaging shocks.
- Specific stress-test outcomes:
  - A one-off 30 percent depreciation of the kip would lead to a sharp rise in the PV of debt-to-GDP and PV of debt-to-revenue ratios.
  - A decline in export growth (by one standard deviation in 2011–12) would push the PV of debt-to-exports up to double its baseline level through 2017 and in excess of the policy-dependent indicative threshold throughout the 20-year projection period.
- Historical-average scenario:
  - Through 2014, debt dynamics are more favorable under the “historical scenario” due to a stronger increase in the GDP deflator in U.S. dollar terms during 2000–2009.
  - In later years, the lower historical average for FDI inflows (3.3 percent of GDP per annum) versus baseline medium-term assumptions (e.g., 14.8 percent of GDP in 2015) requires additional debt financing and leads to worse debt dynamics; in two of three indicators they would remain above thresholds.
- Sensitivity to resource sector performance:
  - Large resource-related projects account for some 10 percent of GDP, expected to nearly double over the medium term under the baseline.
  - Lower commodity prices or delayed projects would worsen external debt sustainability; commercial financing (e.g., bonds backed by future revenues) would increase risks.

### Public sector debt dynamics and scenarios
- Under the baseline, PV of total PPG debt as percent of GDP and percent of revenue are projected to decline over the medium term (contrast to prior DSA which projected initial rise).
- Debt service-to-GDP ratio projected to rise in 2011 before tapering off; PV of debt service-to-revenue ratio expected to decline over the projection period given assumed fiscal adjustment.
- Sensitivity to real kip depreciation:
  - A one-time 30 percent real depreciation of the kip in 2011 would raise the PV of public debt-to-GDP ratio to 64 percent and PV of public debt-to-revenue ratio to 330 percent immediately, before tapering off.
  - Debt service-to-revenue ratio would increase to around 17 percent in 2012 under this shock.
- Alternative scenarios:
  - First alternative (real GDP growth and primary balance at historical averages): primary fiscal deficits about 2 percentage points of GDP higher than baseline; PV of public debt rises above 50 percent of GDP over the longer term.
  - Second alternative (primary balance unchanged from level projected for 2010): similar outcome to first scenario; debt-to-GDP ratio placed on a rising trajectory, indicating need for fiscal consolidation.
- Risk from continued BoL quasi-fiscal activity:
  - If BoL does not phase out quasi-fiscal lending to local governments (e.g., if FDI and ODA are lower than envisaged and BoL fills the investment financing gap), public debt dynamics would worsen significantly.

### Authorities’ view
- Authorities concurred with the overall assessment.
- They acknowledged the relatively high debt level requires fiscal consolidation and strengthening of debt management.
- Authorities emphasize the long maturity profile of loans and the large share of borrowed resources deployed to viable natural resource projects as mitigating factors.

### Conclusions and policy recommendations
- Overall assessment: Lao P.D.R. has made progress reducing external and public debt burden but still faces a high risk of debt distress.
- Key risks: large-scale investments in hydropower and mining that deliver returns only over the medium term; sensitivity to exchange rate swings and fluctuations in export earnings (commodity prices).
- Offsetting factor: high concessionality of official borrowing keeps debt service ratios relatively contained.
- Recommended policy measures:
  - External borrowing should be obtained on concessional terms.
  - Fiscal and quasi-fiscal liabilities should be carefully managed.
  - Continue prudent debt management and cautious assessment and monitoring of large-scale projects, especially those financed from commercial sources.
  - BoL’s planned exit from direct lending to local governments is a welcome development.
  - Improve debt management capacity and develop a medium-term borrowing strategy for the government, including for resource sector activity.
  - Increase disclosure of borrowing plans to enhance assessment of debt sustainability.
  - Given the high risk of debt distress, recourse to nonconcessional external financing should be strictly limited to viable projects.

*Source: IMF and World Bank Debt Sustainability Analysis for Lao P.D.R., text as provided in the DSA unit.*

### Box 1: Baseline Scenario—Underlying Assumptions (2010–30)

### Box 1: Baseline Scenario—Underlying Assumptions (2010–30)

### Growth and structural assumptions
- The baseline assumes further development of Lao P.D.R.’s potential in hydropower and mining, supported by reforms to further the transition to a market economy and a strengthening of macroeconomic policy frameworks.
- Real GDP growth:
  - Projected to average 7.6 percent in 2010–15 as new resource sector-related projects come on stream.
  - Boosted in the near term by the start of operations of the 1,070 MW Nam Theun II hydropower station in March 2010.
  - Expected to moderate to 6.6 percent on average in 2016–30 as the resource sector matures.
- Growth profile: overall growth is relatively volatile because resource sector output is subject to discrete changes as new projects come online or existing mines are exhausted.
- Structural change: over time, the share of agriculture in GDP declines, with industry and services increasing; graduation from low-income status could be achieved in the second half of the projection period.

### Commodity prices and inflation
- Copper and gold price projections through 2015 are based on the WEO projections as of June 2010 and are assumed constant in real terms afterwards.
- Inflation:
  - Projected to average about 5 percent during 2010–11, as exchange rate stability contains external inflationary pressures.
  - Expected to moderate to 3 percent over the longer term.

### Balance of payments, external sector, and capital flows
- The balance of payments will go through large swings, reflecting development of the resource sector.
- External current account deficit:
  - Projected to narrow considerably in the long run.
  - The nonresource current account would deteriorate over the next decade reflecting the increasing cost of industrialization, before moderating over the longer term.
  - This would increasingly be offset by a shift to surplus in the resource current account as large projects transition from construction to operation phase.
- Assumed drivers of export and services pickup: strengthened competitiveness and regional integration, supported by improvements in the investment climate, streamlining of business regulations, and meeting trade commitments.
- Overall external position: expected to strengthen over time, reflecting strong private capital and official inflows, and increasing international reserve accumulation in the outer years as the resource sector matures and industrialization takes hold.
- Private capital inflows in the form of FDI are expected to increase through the first half of the projection period as large new projects get underway.

### External financing assumptions (terms and composition)
- External financing is assumed to remain largely on concessional terms over the medium term. Over the long term, grant financing decreases with economic development.
- Multilateral creditors:
  - Projected loan disbursements in the medium term are relatively low since IDA and the AsDB have a pipeline of operations financed on grant terms.
  - Over the longer term, grant financing decreases with economic development, leading to a moderate increase in project loans.
- Bilateral creditors:
  - For 2010–11, projected loan disbursements increase as donors provide support to the government’s development agenda.
  - Over the medium and longer term, greater participation by new emerging market creditors leads bilateral finance to take on an increasing role, including for onlending purposes to SOEs.
- Commercial creditors:
  - Over the medium term, commercial disbursements are relatively small, principally used to finance a portion of the government’s equity stake participation in new hydropower projects.
  - The US$70 million bond issue backed by royalties from the Theun-Hinboun and Houay Ho projects has been repeatedly postponed and is not assumed to materialize in the current DSA.
  - The 2011 debt projection assumes government borrowing to finance its equity stake in the Hongsa Lignite project (coal mine and power plant).

### Fiscal policy and public debt dynamics
- Fiscal consolidation:
  - Fiscal policy is projected to remain on a consolidation path from the 7.2 percent of GDP overall deficit recorded in FY09.
  - The deficit is projected to narrow to about 4.9 percent of GDP in FY10 and to decline further in subsequent years.
  - Consolidation is expected to be supported by rising resource sector revenues thanks to strong commodity prices.
- Domestic debt:
  - Decreases over the medium term driven by repayments of the lending from the BoL.
  - Increases in the long term as net external financing in percent of GDP declines and a larger share of budget deficits is financed domestically.

### Selected key numerical projections and indicators (baseline)
- Real GDP growth (in percent): historical averages and projections include 7.8, 7.6, 7.0, 6.4, 7.6, 6.6 across various periods as shown in the staff projections.
- Inflation (GDP deflator, in percent): assumed to converge to 3.0 percent over the medium-to-long term.
- Grant element of new public sector borrowing (in percent): projected values include 25.2, 24.8, 27.5, 29.0, 30.0, 28.4, 27.5, 27.0, 21.7, 25.2 in the projection years where reported.
- Government revenues (excluding grants, in percent of GDP): values reported include 14.1, 14.3, 15.3, 15.9, 17.4, 18.3, 18.4, 18.1, 17.5, 18.0, 23.8, 19.8 in historical and projected years.
- Nominal GDP (in billions of U.S. dollars): projected to rise from 4.2 to 5.3 to 5.6 to 6.3 and onward to 15.4 and 37.8 in later projection years reported in the DSA tables.
- Present value (PV) of PPG external debt (in percent of exports and revenue): sample reported PV ratios include 43.4 (in percent of GDP terms for a baseline year) and other PV-to-exports and PV-to-revenue ratios as reported in the tables (e.g., PV of PPG external debt in percent of exports and in percent of government revenues reported in the DSA tables).

### Stress tests and sensitivity analysis (summary)
- The DSA includes a range of alternative scenarios and bound tests (2010–30) such as:
  - A1: Key variables at their historical averages in 2010–30.
  - A2: New public sector loans on less favorable terms in 2010–30.
  - B1–B6: Bound tests including shocks to real GDP growth, export value growth, U.S. dollar GDP deflator, net nondebt creating flows, combinations of shocks, and a one-time 30 percent nominal depreciation in 2011.
- Sensitivity outcomes:
  - Some scenarios (e.g., one-time 30 percent nominal depreciation in 2011) produce large increases in debt indicators (presented in the DSA figures and tables).
  - The most extreme stress test for specific indicators is identified as the test that yields the highest ratio in 2020 (e.g., One-time depreciation shock for several indicators; Exports shock for others).

_Italic: Source — Lao P.D.R. DSA baseline assumptions as presented in Box 1 of the Staff Report for the 2010 Article IV Consultation (staff estimates and projections)._

### ANNEX I. LAO P.D.R.: FUND RELATIONS

### ANNEX I. LAO P.D.R.: FUND RELATIONS

### I. Membership Status
- Joined 7/05/61; Article VIII

### II. General Resources Account
- Quota: 52.90 SDR million; Percent Quota: 100.00
- Fund holdings of currency: 52.90 SDR million; Percent: 100.00

### III. SDR Department
- Net cumulative allocation: 50.68 SDR million; Percent Allocation: 100.00
- Holdings: 51.07 SDR million; Percent Allocation: 100.78

### IV. Outstanding Purchases and Loans
- PRGF Arrangements: 8.15 SDR million; Percent Quota: 15.41

### V. Latest Financial Arrangements
- PRGF approved 4/25/01; expiration 4/24/05; Amount Approved: 31.70 SDR million; Amount Drawn: 18.12 SDR million
- PRGF approved 6/04/93; expiration 5/07/97; Amount Approved: 35.19 SDR million; Amount Drawn: 35.19 SDR million
- SAF approved 9/18/89; expiration 9/17/92; Amount Approved: 20.51 SDR million; Amount Drawn: 20.51 SDR million

### VI. Projected Obligations to Fund (SDR million; based on existing use of resources and present holdings of SDRs)
- Forthcoming obligations by year:
  - 2010 Principal: 1.81; Charges/interest: 0.00; Total: 1.81
  - 2011 Principal: 3.17; Charges/interest: 0.00; Total: 3.17
  - 2012 Principal: 2.27; Charges/interest: 0.00; Total: 2.27
  - 2013 Principal: 0.91; Charges/interest: 0.00; Total: 0.91
  - 2014 Principal: 0.00; Charges/interest: 0.00; Total: 0.00

### VII. Implementation of Heavily Indebted Poor Countries Initiative (HIPC)
- Not applicable

### VIII. Implementation of Multilateral Debt Relief Initiative (MDRI)
- Not applicable

### IX. Safeguards Assessments
- A safeguards assessment of the Bank of Lao P.D.R. (BoL) was completed in April 2003 in the context of an ECF arrangement (Country Report Nos. 03/308 and 05/08).
- Progress on implementing the safeguards assessment recommendations has been slow.
- Authorities indicated they were not in a position to implement an earlier agreement to undertake a joint audit of the BoL’s 2003 and 2004 accounts by the state auditor and an international audit firm.
- The state auditor has completed these audits; the joint audit issue remains unresolved.

### X. Exchange Arrangement
- De jure regime: managed float. De facto regime: stabilized.
- BoL sets a daily official reference rate calculated as a weighted average of the previous day’s interbank rates.
- Commercial banks and foreign exchange bureaus must maintain buying and selling rates within ± 0.25 percent of the BoL’s daily reference rate for the U.S. dollar.
- For the euro and baht, the buying and selling rates may not exceed a margin of 0.5 percent.
- For other currencies, a margin of 2 percent applies.
- On May 28, 2010, Lao P.D.R. accepted the obligations under Article VIII, Section 2, 3, and 4, following the elimination of one restriction subject to Fund jurisdiction under Article VIII arising from a requirement to obtain tax payment certificates for some transactions.
- Lao P.D.R. now maintains an exchange system free of restrictions on the making of payments and transfers for current international transactions, except for restrictions imposed solely for the preservation of national or international security notified to the Fund pursuant to Decision No. 144-(52/51).

### XI. Last Article IV Consultation Discussions
- Discussions held in Vientiane during May 13–27, 2009.
- Staff report (Country Report No. 09/284) was discussed by the Executive Board on July 10, 2009 and published on September 11, 2009.

### XII. Technical Assistance During the Past 18 Months
- STA: Government Finance Statistics (May 2009)
- FAD: Peripatetic expert in customs administration

### XIII. Resident Representative
- Mr. Benedict Bingham assumed the Senior Resident Representative post for Vietnam and Lao P.D.R., based in Hanoi, on October 17, 2007.
- The IMF’s local office in Vientiane was closed in July 2010.
- Contacts with the authorities are henceforth handled by the Hanoi office.

*Source: ANNEX I. LAO P.D.R.: FUND RELATIONS (As of June 30, 2010).*

### ANNEX V. LAO P.D.R.: MILLENNIUM DEVELOPMENT GOALS INDICATORS

### ANNEX V. LAO P.D.R.: MILLENNIUM DEVELOPMENT GOALS INDICATORS

### Millennium Development Goals indicators — evolution and key datapoints
- Life expectancy at birth (years):  
  - East Asia & Pacific: 70 (2004), 71 (2005)  
  - Lao PDR: 55 (2004), 56 (2005)  
  - Low income countries: 59 (2004), 59 (2005)
- Infant mortality (per 1,000 live births):  
  - East Asia & Pacific: 29 (2004), 26 (2005)  
  - Lao PDR: 77 (2000), 70 (2005)  
  - Low income countries: 80 (2004), 75 (2005)
- Maternal mortality (per 100,000 live births):  
  - East Asia & Pacific: 117 (2004)  
  - Lao PDR: 405 (2005)  
  - Low income countries: 684 (2004)
- Child malnutrition, weight for age (% of under 5):  
  - East Asia & Pacific: 15 (2000), 15 (2005)  
  - Lao PDR: 40 (2000), 38 (2006)  
  - Low income countries: 39 (2004)
- Access to improved water source (% of population):  
  - East Asia & Pacific: 79 (2004), 79 (2005)  
  - Lao PDR: 51 (2004), 58 (2006)  
  - Low income countries: 75 (2004), 75 (2005)
- Access to improved sanitation facilities (% of population):  
  - East Asia & Pacific: 51 (2004), 51 (2005)  
  - Lao PDR: 30 (2004), 45 (2006)  
  - Low income countries: 38 (2004), 38 (2005)
- Literacy (% of population age 15+):  
  - East Asia & Pacific: 91 (2004), 98 (2005)  
  - Lao PDR: 73 (2005), 84 (2005)  
  - Low income countries: 62 (2004), 74 (2005)
- Children reaching grade 5 (% of grade 1 students):  
  - East Asia & Pacific: data not shown for 2004–2005  
  - Lao PDR: 63 (2003), 68 (2008)  
  - Low income countries: 72 (2003), 76 (2005)
- Primary completion rate, total (% of relevant age group):  
  - East Asia & Pacific: 98 (2004), 98 (2005)  
  - Lao PDR: 74 (2004), 76 (2005)  
  - Low income countries: 78 (2004), 74 (2005)

Source note: World Bank data, and Population and Housing Census for 2005 (NSC). Maternal mortality rates for East Asia & Pacific and Low Income Countries are adjusted. Primary completion rate definition provided in source.

### Background and economic performance (summary of PIN, January 31, 2011)
- 2009 GDP growth: 7.6 percent.  
  - Growth supported by mining and hydropower projects, fiscal expansion, accommodative monetary policy, and one-off events (South-East Asia games, December 2009).
- Inflation and asset prices:  
  - Inflation contained at 4.9 percent (text statement).  
  - Prices of real estate and land rising rapidly.
- External and reserve developments:  
  - Gross international reserves of the Bank of Lao P.D.R. (BoL) around US$630 million, supported by SDR allocation from the IMF (US$65 million) and sales of U.S. dollar-denominated BoL securities to domestic banks (US$43 million).  
  - Net foreign assets (NFA) of the banking system fell by a further US$215 million in 2009.
- Fiscal and monetary stance (drivers of external pressure):  
  - Overall fiscal deficit widened by 4.4 percentage points of GDP to 7.2 percent of GDP in FY09.  
  - Off-budget spending increase of 4 percent of GDP, funded mostly by BoL loans to provinces.  
  - Growth of credit to the private sector rose to 88 percent in 2009; credit growth by some smaller private banks exceeded 100 percent.
- Current account and FDI:  
  - Nonresource current account deficit widened from 6 to 12 percent of GDP between 2007 and 2009.  
  - FDI inflows slowed due to delays and postponements in mining and hydropower projects after the global crisis.
- Outlook for 2010 (staff projections in PIN):  
  - Growth projected to remain close to 8 percent.  
  - Start of commercial operations of Nam Theun II hydropower project in March 2010 expected to support growth.  
  - Inflation expected to recede to 5½ percent by end-2010 (text uses "5½ percent").

### Risks, structural issues, and policy considerations highlighted by staff
- Financial sector risks:  
  - Rapid expansion in number of banks and rapid credit growth pose risks.  
  - Reported NPL ratios remain low but may rise later in a credit boom.  
  - Capitalization of the three state-owned commercial banks remains below prudential limits.  
  - Commercial banks are maintaining a net long position in foreign exchange of about 2 percent of GDP; some banks exceed prudential limits on net open position.  
  - Significant currency mismatches in the nonbank private sector with many borrowers in foreign currency lacking foreign currency income.
- Policy recommendations and instruments suggested:  
  - Keep fiscal consolidation on a medium-term path; narrow the overall fiscal deficit and phase out off-budget spending financed by central bank direct lending to provinces.  
  - Build medium-term consolidation on revenue gains (including from the resources sector and the newly-introduced VAT) and prioritize infrastructure spending.  
  - Articulate a plan to reduce growth of private sector credit; consider all available instruments including:  
    - raising reserve requirements,  
    - stepping up sales of central bank securities to domestic banks,  
    - raising the policy rate, and  
    - using prudential curbs.  
  - Scrutinize and, if necessary, mandate tightening of bank lending standards.  
  - Clarify and enforce existing prudential regulations, including loan classification rules, limits on banks’ net open foreign currency position, and prohibition of bank lending in foreign currency to borrowers without foreign currency income.
- Exchange rate and monetary anchor:  
  - Staff believes the kip is overvalued, but endorses a stabilized exchange rate regime as the appropriate monetary anchor for Lao P.D.R.  
  - Given the downward trend in banking system NFA, consistent fiscal and monetary policies are especially important.
- Structural and statistical priorities:  
  - Strengthen soundness of the financial system, improve the business climate and trade integration, pursue SOE reforms, and implement regulatory and legal reforms needed for WTO accession.  
  - Improve quality and timeliness of statistics, with urgent attention to balance of payments and national accounts statistics.
- Institutional development:  
  - Staff welcomes the authorities’ acceptance of obligations under Article VIII, Sections 2, 3, and 4 of the IMF’s Articles of Agreement.

### Executive Board assessment (high-level)
- Confirmed that Lao P.D.R.’s economy held up well despite the global recession, with higher-than-average growth for low-income countries in Asia and contained inflation.  
- Noted expansionary macroeconomic policies put pressure on the balance of payments and reduced the liquidity buffer (NFA) of the banking system relative to 2000–07.  
- Urged fiscal tightening and measures to rein in credit growth to mitigate further declines in banking system NFA and financial-sector risks.

### Selected economic and financial indicators, 2005–10 (key figures)
- Real GDP growth (percent): 6.8 (2005), 8.6 (2006), 7.8 (2007), 7.8 (2008), 7.6 (2009), 7.7 (2010 Est. Proj.)
- CPI (annual average, percent): 7.2 (2005), 6.8 (2006), 4.5 (2007), 7.6 (2008), 0.0 (2009), 5.4 (2010)
- CPI (end year, percent): 8.8 (2005), 4.7 (2006), 5.6 (2007), 3.2 (2008), 3.9 (2009), 5.5 (2010)
- Public finances (percent of GDP):  
  - Revenue: 12.1 (2005), 12.5 (2006), 13.9 (2007), 14.4 (2008), 14.9 (2009), 15.5 (2010)  
  - Of which: Resources: 0.9 (2005), 2.0 (2006), 2.7 (2007), 3.3 (2008), 2.3 (2009), 2.6 (2010)  
  - Grants: 1.8 (2005), 2.0 (2006), 1.7 (2007), 1.6 (2008), 2.3 (2009), 2.1 (2010)  
  - Expenditure: 18.3 (2005), 17.4 (2006), 18.3 (2007), 18.7 (2008), 24.4 (2009), 22.5 (2010)  
  - Current (includes contingency and discrepancy): 10.2 (2005), 10.1 (2006), 10.2 (2007), 11.5 (2008), 12.9 (2009), 12.6 (2010)  
  - Capital and net lending: 8.1 (2005), 7.2 (2006), 8.0 (2007), 7.2 (2008), 11.5 (2009), 9.9 (2010)  
  - Overall balance (including grants): -4.4 (2005), -2.9 (2006), -2.7 (2007), -2.8 (2008), -7.2 (2009), -4.9 (2010)  
  - Domestic financing: -0.1 (2005), -1.2 (2006), -1.1 (2007), -0.3 (2008), 5.0 (2009), 3.1 (2010)  
  - External financing: 4.5 (2005), 4.1 (2006), 3.8 (2007), 3.0 (2008), 2.2 (2009), 1.8 (2010)
- Money and credit (annual percent change):  
  - Reserve money: 18.2 (2005), 37.2 (2006), 58.8 (2007), 20.2 (2008), 34.7 (2009), 1.2 (2010)  
  - Broad money: 7.7 (2005), 30.1 (2006), 38.7 (2007), 18.3 (2008), 31.3 (2009), 25.0 (2010)  
  - Bank credit to the economy: 7.6 (2005), -9.1 (2006), 21.0 (2007), 84.6 (2008), 90.7 (2009), 42.9 (2010)
- Interest rates (end-of-period):  
  - On three-month kip deposits: 5.5 (2005), 5.5 (2006), 5.5 (2007), 6.0 (2008), 6.0 (2009)  
  - On short-term kip loans (one year): 17.8 (2005), 14.0 (2006), 11.5 (2007), 11.5 (2008), 10.0 (2009)
- Balance of payments:  
  - Exports (US$ millions): 697 (2005), 1,133 (2006), 1,321 (2007), 1,605 (2008), 1,485 (2009), 2,125 (2010)  
    - Exports percent change: 30.1 (2005), 62.6 (2006), 16.6 (2007), 21.5 (2008), -7.5 (2009), 43.1 (2010)  
  - Imports (US$ millions): 1,270 (2005), 1,602 (2006), 2,158 (2007), 2,829 (2008), 2,720 (2009), 3,031 (2010)  
    - Imports percent change: 20.3 (2005), 26.1 (2006), 34.7 (2007), 31.1 (2008), -3.9 (2009), 11.5 (2010)  
  - Current account balance (US$ millions): -492 (2005), -398 (2006), -672 (2007), -985 (2008), -984 (2009), -647 (2010)  
    - In percent of GDP: -18.1 (2005), -11.2 (2006), -15.9 (2007), -18.5 (2008), -17.6 (2009), -10.2 (2010)
- Reserves and external debt:  
  - Gross official reserves (US$ millions): 238 (2005), 336 (2006), 528 (2007), 636 (2008), 632 (2009), 555 (2010)  
  - Reserves in months of prospective goods and services imports: 2.2 (2005), 2.5 (2006), 2.8 (2007), 3.3 (2008), 2.8 (2009), 2.0 (2010)  
  - External public debt (US$ millions): 2,203 (2005), 2,351 (2006), 2,521 (2007), 2,949 (2008), 3,109 (2009), 3,270 (2010)  
    - External public debt in percent of GDP: 80.8 (2005), 66.0 (2006), 59.7 (2007), 55.5 (2008), 55.5 (2009), 51.6 (2010)  
  - External public debt service (percent of exports): 7.4 (2005), 3.6 (2006), 4.0 (2007), 4.3 (2008), 5.0 (2009), 4.8 (2010)
- Exchange rate and competitiveness:  
  - Official exchange rate (kip per U.S. dollar; end-of-period): 10,767 (2005), 9,655 (2006), 9,341 (2007), 8,466 (2008), 8,476 (2009), 8,291 (2010)  
    - (Figure for 2010 is as of June 11, 2010.)
  - Real effective exchange rate (2000=100): 99.1 (2005), 104.4 (2006), 104.5 (2007), 114.1 (2008), 120.3 (2009), 122.7 (2010)  
    - (Figure for 2010 is as of May 2010.)
- Memorandum items (GDP at current market prices):  
  - In billions of kip: 28,948 (2005), 35,981 (2006), 40,467 (2007), 46,215 (2008), 47,567 (2009), 53,727 (2010)  
  - In millions of U.S. dollars: 2,726 (2005), 3,564 (2006), 4,226 (2007), 5,313 (2008), 5,598 (2009), 6,341 (2010)

Sources: Data provided by the Lao P.D.R. authorities; and IMF staff estimates and projections. Fiscal year basis (October to September). Definitions and footnotes provided in source.

*Source: _cr1144 - ANNEX V. LAO P.D.R.: MILLENNIUM DEVELOPMENT GOALS INDICATORS (PDF) — World Bank data, Population and Housing Census for 2005 (NSC); IMF Public Information Notice No. 11/12, January 31, 2011.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/scr/2011/_cr1144.pdf_