IMF Staff Concludes 2019 Article IV Consultation Mission to Lao P.D.R.

IMF News, May 21, 2019

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Canonical URL: IMF Staff Concludes 2019 Article IV Consultation Mission to Lao P.D.R.

Mission dates: May 8 to May 22, 2019.
Statement date: May 21, 2019.
Press Release No.: 19/178.
End-of-Mission press releases convey preliminary findings of IMF staff teams; the views expressed are those of IMF staff and do not necessarily represent the views of the IMF’s Executive Board.
IMF Communications Department — MEDIA RELATIONS: PRESS OFFICER: Ting Yan; Phone: +1 202 623-7100; Email: MEDIA@IMF.org.

2018 economic growth: 6.3 percent (growth slowed mainly due to natural disasters and a tragic dam collapse).
Inflation: remained low (no numeric value provided).
Outlook drivers:
- 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.
- Current account deficits will persist with high import demand.

Downside risks tilted to external factors:
- 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.
Upside factors:
- Faster regional growth and deepening integration within the ASEAN could boost investment, trade, and tourism.
- Accelerated reform efforts could mitigate downside risks.

Fiscal deficit developments:
- Fiscal deficit: 4.4 percent of GDP in 2018 (down from 5.5 percent in 2017).
- Fiscal consolidation in 2018 was partly affected by spending diverted for natural disaster recovery and underperforming revenues.
Policy commitments and priorities:
- Government committed to gradual fiscal consolidation supported by comprehensive public financial management reforms to strengthen fiscal governance.
- Ongoing reform priorities: implement a well-defined medium-term revenue strategy, simplify and broad-base tax legislation, and automate tax administration systems.
- Align spending priorities with Sustainable Development Goals (SDGs) to advance inclusive development objectives and strengthen budget accountability mechanisms.
- Promote greater participation of women in the economy to boost growth.
Public debt management:
- New Public Debt Management Law (2018) establishes a rules-based mechanism for contracting and guaranteeing public debt.
- Priorities: consolidate the Ministry of Finance’s oversight powers over public debt and timely development of a 5-year strategy for debt management.
- Government commitment to assess and target infrastructure projects with high social returns and finance these at concessional terms when possible to benefit debt sustainability.

Legal framework developments: New laws for the Bank of Lao P.D.R., Commercial Bank, and Payment Systems were all adopted in 2018.
Implementation needs: develop necessary regulations, provide clear guidance, and deploy a proactive communication strategy to support the new legal framework.

Improvements noted:
- Authorities began publishing fiscal data in 2018.
- National accounts’ timeliness, breadth, and frequency are being gradually improved.
Remaining needs:
- Further efforts required to bring monetary and financial sector indicators to regional reporting standards.

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;
- Other senior officials, the Lao Women's Union, development partners, and representatives of the private sector.
IMF team expressed thanks to the government and the people of Lao P.D.R. and wished them success in raising economic growth and improving livelihoods.

IMF Staff Concludes 2019 Article IV Consultation Mission to Lao P.D.R., Press Release No. 19/178, May 21, 2019.

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