IMF Staff Completes 2025 Article IV Mission to Lao PDR

IMF News, November 19, 2025

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An IMF team led by Ms. Angana Banerji conducted discussions for the 2025 Article IV Consultation during November 5-19, 2025.
Press Release No. 25/380.
The statement reflects IMF staff’s preliminary findings; staff will prepare a report that, subject to management approval, will be presented to the IMF's Executive Board for discussion and decision.

Growth:
- Growth is projected to remain robust at 4.5 percent in 2025−2026.
Inflation and monetary conditions:
- Rapid disinflation has occurred; headline inflation is projected to rise gradually in 2026, driven by planned fiscal support and further electricity tariff increases.
- Monetary policy recommendation: remain on hold with a tightening bias.
External sector:
- The current account surplus is expected to narrow from its 2025 peak, though external balances should remain stable, supported by stable FDI inflows.
Reserves and external debt:
- Underlying vulnerabilities include low international reserves and high public and private external debt.

Near-term risks are tilted to the downside, including:
- Escalating geopolitical tensions.
- Commodity and global financial market volatility.
- Premature policy easing.
- Natural disasters.
Financial sector vulnerabilities:
- Weak profitability and capital buffers in key segments of the banking system leave it vulnerable to adverse shocks.
Structural and exposure risks:
- High import dependence and significant exposure to external shocks.
Upside potential:
- Ongoing regional integration, if well implemented, poses upside risks for growth and external balances in the medium term.

Monetary policy:
- Remain on hold with a tightening bias because monetary conditions are still accommodative and inflation risks persist.
- Maintain the policy rate while advancing liquidity management reforms to help raise real interest rates and ensure that monetary conditions remain tight.
Exchange rate and reserves:
- Allow the exchange rate to act as a shock absorber, while building reserves when feasible, to strengthen resilience given high external debt, import dependence, and vulnerability to external shocks.
Data and management:
- Improve external and debt statistics, including state-owned enterprise (SOE) debt, for effective FX and debt management.

Fiscal stance:
- The draft 2026 state budget signals a marked easing of the fiscal stance due to higher wages and capital outlays.
- Recommendation: a more modest fiscal relaxation—supported by concrete plans to strengthen revenue collection—would be preferable to create space for additional priority social and infrastructure spending.
Revenue measures:
- Additional revenue measures are needed, including:
- A strengthened large taxpayers office.
- Reductions in corporate tax gaps.
- Rules-based tax incentives.
- Taxation of emerging sectors.
Debt management and PFM:
- Continue progress in debt management, transparency in asset sales, and public financial management, including an upgraded public-private partnership framework.

Financial stability:
- Safeguard financial stability by closely monitoring liquidity and solvency conditions based on sound financial sector data and stress-testing frameworks.
- Continue efforts to strengthen supervision, bank capital and liquidity positions, and prudential frameworks to support financial sector resilience.
SOE reforms:
- Progress in improving SOE balance sheets would help reduce credit risks over time.
- Deepen SOE reforms through improved operational efficiency, stronger oversight, disclosure, and modernized regulatory frameworks to reduce fiscal risks.

Priority areas:
- Improve the business environment, human capital, and governance to help lift potential growth toward the government’s target.
Specific measures:
- Enhance transparency, inter-agency coordination, data quality, and public access to information to strengthen accountability and policy making.
- Upgrade and streamline regulations and reinforce anti-corruption frameworks to boost productivity.
- Diversify export products and markets and boost tourism through better connectivity and by easing entry requirements.

The IMF team met with officials from the Bank of the Lao PDR, government ministries, other public agencies, representatives of the private sector, and development partners.
The team expressed thanks for the productive discussions and exceptional hospitality.

IMF Communications Department — November 19, 2025.