Lao P.D.R. 2025 Article IV Consultation: IMF Staff Concluding Statement
IMF News, December 19, 2025
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- Published: December 19, 2025
Key findings and recent developments
- Supported by favorable external conditions and strong policy actions by the Bank of Lao PDR (BOL) and Ministry of Finance (MOF) since 2024H2, the economy and exchange rate (ER) have stabilized.
- Growth drivers in 2025−26: stronger electricity exports, tourism, FDI, and a large fiscal relaxation in 2026 after multiple years of rising fiscal surpluses.
- Inflation trajectory: fell from 26 percent in mid-2024 to 4 percent in October 2025, but the planned fiscal relaxation in 2026 is expected to rekindle inflationary pressures in the near term.
- External and fiscal vulnerabilities persist: low gross international reserves (GIR), negative net international investment position (NIIP), high public and private external debt, constrained access to international markets, and sizable contingent liabilities from SOEs and banks.
- GIR improvement: from US$1.7 billion at end-2024 to US$2.3 billion (2.4 months of imports) at end-September 2025.
Outlook and scenarios
- Near-term projection: Growth in 2025−26 is projected at 4.5 percent.
- 2026 dynamics: domestic demand boosted by a significant minimum wage increase and fiscal relaxation; CAS projected to shrink in 2026 from record highs in 2025.
- Inflation: though disinflation continues, inflation is expected to rise gradually over 2026 due to the planned large fiscal impulse and further electricity tariff increases; average inflation in 2026 is expected to decline (see Table for numeric series).
- Medium-term baseline (unchanged policies): subdued growth due to labor emigration and low productivity; GIR decline to around 2.1 months of imports in 2030; primary budget surpluses of around 2½–3 percent of GDP would help reduce public debt to around 58 percent of GDP over the medium term, but most debt burden indicators remain well above indicative thresholds and public debt continues to be assessed as unsustainable.
- Risks: near-term risks tilted to the downside (geopolitical tensions; escalating trade measures; commodity price volatility; tighter global financial conditions; private sector outflows; policy reversals; natural disasters; potential banking sector stress). Upside risks include deeper regional integration and improved connectivity, logistics, and digital facilitation within ASEAN.
Selected economic and financial indicators (from Table 1, selected entries)
- Nominal GDP (in billions of kip): 180751 (2021), 217350 (2022), 280844 (2023), 342976 (2024), 185063 (2025 H1 Est.), 385594 (2025 Est.), 430367 (2026 Proj.), 471292 (2027 Proj.), 513939 (2028 Proj.), 559769 (2029 Proj.), 619137 (2030 Proj.).
- Real GDP growth (staff projections): 4.7 (2025), 4.5 (2026), 4.0 (2027), 3.5 (2028), 3.0 (2029), (no single number for 2030 in table row).
- Consumer prices (annual average): 3.8 (2021), 23.0 (2022), 31.2 (2023), 23.1 (2024), 10.9 (2025), 7.7 (2026), 6.9 (2027), 5.2 (2028), 5.4 (2029), 5.7 (2030).
- Gross official reserves (in millions of U.S. dollars): 1245.0 (2021), 990.5 (2022), 1182.5 (2023), 1606.9 (2024), 2142.9 (2025), 2435.8 (2026), 2650.3 (2027), 2865.2 (2028), 2890.0 (2029), 2804.6 (2030), 2611.1 (memorandum or continuation).
- GIR in months of prospective imports of goods and services: 2.2 (2024), 2.4 (end-September 2025 reported).
- Public and public guaranteed debt (percent of GDP): 92.2 (2021), 115.7 (2022), 108.8 (2023), 94.0 (2024), 82.5 (2025), 77.2 (2026), 70.9 (2027), 61.3 (2028), 57.6 (2029), (2030 row shows further declines).
- Total debt (percent of GDP, memorandum): 175.9 (2021), 216.2 (2022), 211.5 (2023), 197.0 (2024), 183.5 (2025), 176.5 (2026), 169.6 (2027), 163.5 (2028), 158.5 (2029), 153.5 (2030).
- Official exchange rate (kip per U.S. dollar; end-of-period): 11166 (2021), 17238 (2022), 20480 (2023), 21757 (2024), 21535 (2025).
Monetary policy recommendations
- Tighten monetary policy to anchor inflation expectations, given somewhat accommodative monetary conditions (positive output and credit gaps and ER premiums) and upside inflation risks from fiscal easing and wage increases in 2026.
- Allow greater ER flexibility to absorb shocks while avoiding excessive volatility and opportunistically build GIR.
- Increase the monetary policy rate while advancing structural liquidity management reforms (complete TSA implementation, introduce liquidity-supply instruments, and develop an interest rate corridor).
- Ensure disinflation is firmly entrenched before further easing the policy rate; use the planned 2026 CPI rebasing and 2026Q1 survey of inflation expectations to improve policy decisions.
External sector and reserve management recommendations
- Continue to allow exchange rate flexibility, avoid excessive volatility, and boost GIR opportunistically.
- If gold is used to boost GIR, ensure legal title and requisite purity standards to protect GIR liquidity.
- Accelerate export diversification away from commodities toward higher-value-added agriculture, manufacturing, and international tourism.
- Strengthen transportation connectivity, streamline entry requirements, and improve the business environment to boost tourism.
- Improve external and debt statistics, reduce unrecorded trade and capital outflows via improved customs administration and SOE debt transparency.
- Strengthen the BOL-led cross-agency effort to improve external and debt statistics and obtain comprehensive information on large private sector external liabilities and offtake contracts.
Fiscal policy recommendations
- Maintain strong primary budget surpluses and improve the composition of fiscal policy to support sustainable growth and debt sustainability.
- Strengthen revenue mobilization: accelerate tax administration reforms in 2026 and consider tax increases to meet the NSEDP revenue target of 20 percent of GDP by 2030 if needed.
- Policy priorities for revenue: strengthen a centralized Large Taxpayers Office; close large corporate tax gaps from concessional agreements and establish a rules-based, transparent tax incentive regime; publish annual tax expenditure reports; tax emerging sectors (e.g., digital services); introduce property taxes; enhance excise taxes on fuels, tobacco, alcohol.
- Improve customs administration: better valuation, automation and risk-based inspections, particularly in special economic zones.
- Civil service wage policy: align wage increases with accompanying civil service and regulatory reforms (skills-based hiring, promotion, streamlined regulatory procedures, strengthened data and interagency coordination); provide MOF full visibility on civil service restructuring; consider revisiting the procyclical rule aligning the wage bill to domestic revenue.
- Debt and fiscal risk management priorities: greater transparency in debt reporting (including SOE balance sheets and non-guaranteed debt); full disclosure of asset sales, investment contracts, concessional agreements, and debt agreements; public financial management reforms including a sound PPP framework; central MOF role in project selection and oversight.
- Cash management improvements: TSA implementation and adoption of a new Chart of Accounts for the 2027 budget.
Financial sector recommendations
- Monitor banking sector liquidity, FX, and credit risks closely; underlying weaknesses are obscured by data limitations and past regulatory forbearance.
- Accelerate implementation of new capital and liquidity requirements, enforce existing regulations on bank capitalization, and develop strategies for undercapitalized banks.
- Eliminate regulatory limits on NPLs to reduce moral hazard, ensure adequate NPL provisioning, implement sound NPL resolution, and fully terminate loan forbearance as planned.
- Strengthen SOE balance sheets to reduce bank credit risk and improve financial stability.
- Use the forthcoming Financial Sector Stability Review (FSSR) to develop a well-sequenced reform roadmap.
Structural reform recommendations to raise potential output
- Close structural gaps in governance, external sector openness, business regulation, and human development; even closing 5–10 percent of these gaps could yield substantial output gains (exceeding 4 percent of GDP over the medium term).
- Prioritize human development reforms followed by governance improvements to deliver the bulk of potential growth dividends.
- Governance measures: strengthen independence and capacity of anti-corruption agencies; publish audit and procurement results; digitalize government processes; upgrade and streamline regulations; improve data quality, coverage and transparency; enhance AML/CFT effectiveness.
- Deepen SOE reforms with enhanced monitoring, transparency (regular publication of audited financial statements), modernized regulatory and institutional frameworks, and reforms at Électricité du Laos to improve operational efficiency, transmission and distribution, and financial viability via gradual tariff adjustments to cover costs.
Fiscal cost and technical notes
- The cost of fully implementing the 10th NSEDP is estimated at 100-106 percent of 2025 GDP over 2026–2030, based on sectoral costing of infrastructure, human capital, climate resilience, agriculture, and governance priorities.
- Projections are based on current policies and the IMF’s October 2025 WEO global assumptions, with assumptions on Chinese debt deferrals, repayments, and financing noted in staff footnotes.
- Data limitations and forthcoming GDP and CPI rebasing will affect macroeconomic assessments and may clarify structural shifts since 2015.
Mission and acknowledgements
- An IMF staff team visited Vientiane to conduct Article IV consultation discussions with the Lao PDR authorities during November 5−19, 2025.
IMF staff concluding statement: Lao P.D.R. 2025 Article IV Consultation, December 19, 2025.