Mrs Bounkham Vorachit.

Central bank cuts policy interest rate to support economic stability

The Bank of the Lao PDR (BOL) has reduced its base policy interest rate for the Lao kip by 0.5 percentage points to 8 percent per annum, as part of efforts to maintain monetary stability amid ongoing external and domestic economic challenges.
The decision was made at the first Monetary Policy Committee meeting of 2026, held on February 20 and chaired by BOL Governor Mrs Bounkham Vorachit.
Following the committee’s announcement, the 7-day base policy interest rate was lowered from 8.5 percent to 8 percent per annum.
Committee members reviewed the implementation of resolutions adopted at the previous meeting, assessed the performance of key monetary policy instruments, and discussed future policy directions.
According to the central bank, the global economic outlook remains uncertain due to geopolitical tensions and complex political and economic developments among major economies. These factors have contributed to volatility in fuel, energy, gold and food prices, and are expected to weigh on global growth.
Policy interest rates in several major economies are anticipated to ease in 2026 as inflation trends move closer to target levels.
Domestically, the committee noted that the economic base remains fragile, with continued high demand for foreign currency to service external debt and persistent exchange rate fluctuations.
Credit expansion within the banking system has yet to fully align with the country’s economic restructuring goals.
Despite these pressures, coordinated policy implementation across sectors has helped stabilise the macroeconomic environment. The committee observed that inflation is projected to remain at a relatively moderate level of around 5 percent.
The meeting also endorsed the overall direction of monetary macro-management in 2026, emphasising the implementation of an integrated monetary policy framework and a state-managed, market-based exchange rate regime.
The latest rate cut follows several reductions in 2025 as part of a gradual monetary easing cycle.
The rate was lowered from 10.5 percent to 10 percent in March, followed by further reductions to 9.5 percent in June and 9 percent in August. In November, it was cut again to 8.5 percent per annum, reflecting efforts to support liquidity and stimulate economic activity as inflationary pressures eased.
The central bank will continue reviewing and refining policy tools, including interest rates, reserve requirement ratios and the issuance of short-term BOL bonds, while closely monitoring exchange rate movements to mitigate potential inflationary impacts.
The BOL reaffirmed its commitment to safeguarding monetary stability and supporting sustainable economic growth through prudent and responsive policy measures.

By Times Reporters
(Latest Update February 24, 2026)