Members of the NA and the government cabinet applaud to congratulate the adoption of the NA’s resolution on budget plan.

National Assembly adopts 2023 monetary plan with ambitious targets

Members of the National Assembly (NA) on Friday passed a draft of the 2023 monetary plan, vowing to lower the annual average inflation rate to a single digit figure of 9 percent, down from the current two digit figure.
Average inflation was recorded at 19.69 percent over the past 10 months. In October alone, prices jumped by 36.75 percent, up from 34.05 percent in September and 30.01 percent in August.
Skyrocketing inflation, the sharp depreciation of the kip, the uncertain global economic environment, and slow domestic reform has left Laos facing increased challenges, according to the World Bank.
In a bid to ease the situation, the draft plan adopted by the ongoing 4th ordinary session of the NA’s 9th legislature spells out key ambitious targets. They include money supply growth (M2) of not more than 26 percent compared to 2022 and sufficient foreign reserves for the purchase of imports for at least three months.
The plan also sets a target for deposits held by commercial banks to increase to at least 85 percent of gross domestic product (GDP).
Presenting the draft on December 5, the Governor of the Bank of the Lao PDR, Dr Bounleua Sinxayvoravong, said authorities will work with commercial banks to ensure the effective provision of loans to spur the production of goods for export and reduce imports.
Conditions will also be set in place for micro, small and medium enterprises (MSMEs) and small and medium enterprises (SMEs) to more easily access bank loans so they can grow their businesses. Meanwhile, non-performing loans should not exceed 3 percent of the total, the draft plan stated.
To reach these targets, Dr Bounleua said the central bank would review and revise the interest rate in order to control money supply.
The central bank will continue to adjust the compulsory deposit proportion in line with the liquidity of the banking system, money supply and economic growth. 
The bank will also continue to issue bonds according to actual needs.
Amid rising prices, the government pledged to closely monitor and set caps on the price of imported goods in order to prevent unreasonable price hikes.
In light of the depreciation of the kip, action will be taken to strongly encourage greater use of the Lao currency to reduce the need for foreign currency, with Laos suffering a shortage of US dollars.
This shortage meant the government was unable to purchase sufficient petrol in the middle of this year, leading to a drastic drop in supplies.
Dr Bounleua said Laos will push for the use of local currencies with its trading partners to reduce the use of foreign currency – a clear reference to the US dollar.
Laos will be seeking closer transaction links with the banking systems of neighbouring currencies to facilitate capital transfer. Consideration will also be given to digital use of the kip in order to ease cross-border transactions, according to the governor. 
The government is also committed to ensuring that more foreign currency enters the economic system.
This follows reports suggesting that a relatively small proportion of the foreign currency sourced from investment projects and exports has passed through the banking system.
On the same day, the NA sitting, which runs until December 30, also approved the 2023 budget plan and is scheduled to adopt the 2023 socio-economic development plan at the end of this month.

By Souksakhone Vaenkeo
 (Latest Update December 12, 2022)