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Lao People’s Democratic Republic: Selected Issues and Statistical Appendix

Author(s):
International Monetary Fund
Published Date:
November 2006
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II. The Reform of the Lao Banking System1

A. Introduction

1. Over the past decade, the Lao government has undertaken several efforts to restructure and reform the banking system. Most recently, in 2001, the government launched a comprehensive bank reform program with the support of the international community. This reform program, which is still ongoing, sought to address long-standing weaknesses in the state-owned commercial banks (SCB), as well as some of the broader issues related to establishing an effective banking system.

2. Some progress has been made in strengthening the internal organization and credit appraisal procedures of the SCBs, but many challenges remain. In particular, the financial condition of the SCBs is still precarious, and progress in establishing effective governance structures for the banks has been slow. Much work also remains to be done to set up an effective bank supervision system and to create a supportive environment for the development of the banking system.

3. The paper is organized as follows:Section B explores endemic problems in the Lao banking system. Section C describes the broad objectives of the banking restructuring program. Section D assesses progress under the restructuring program. Section E concludes with a discussion of some of the challenges that remain.

B. The Lao Banking System

4. The Lao financial system is shallow and under-developed. The level of monetization—the ratio of broad money-to-GDP is only 18 percent—is lower than in most IDA countries, and the banking system is small with assets of around $630 million (25 percent of GDP). The banking system is dominated by two state-owned commercial banks, which account for just over half of the assets of the banking system.2 There are three private domestic banks, and several branches of foreign banks—mainly Thai—which are permitted to operate only in Vientiane. The weak banking environment has so far limited foreign bank activities mainly to trade finance, and they are not well integrated into the economy.

5. Earlier attempts to restructure the SCBs in the 1990s met with limited success. After the break-up of the monobank system in 1988, the newly created SCBs quickly ran into financial difficulties, and by the early 1990s they were deeply insolvent, weighed down by non-performing loans inherited from the monobank and continued state interference in their operations. In 1994, the government decided to recapitalize SCBs, at a cost of around 2 percent of GDP. However, the recapitalization was not accompanied by any operational restructuring—or a reduction in state interference—and by the end of the decade, all the SCBs were once again deeply insolvent and heavily burdened by non-performing loans.3

6. The failure to make greater progress, reflected a number of endemic problems. These included, most notably:

  • Inadequate governance. Credit decisions by the SCBs have historically been susceptible to pressure to extend credits based on political or social criteria, rather than financial viability.
  • Low capacity. The lack of skilled personnel hampered, in particular, efforts to build up credit appraisal and risk-management capacity at the SCBs.
  • Poor supervision. Inadequacies in banking regulations and the supervisory capacity of the Bank of Lao P.D.R. (BOL) hindered prudential oversight of the banks. The BOL also had difficulty establishing itself as an independent bank supervisor, separate from the banks’ management.

7. In addition, weaknesses in public sector management had a major impact on the SCBs. In the 1990s, the banks’ main problem was directed lending to state-owned enterprises (SOE). Although the SOE sector is relatively small in Lao P.D.R., SOEs were a major source of non-performing loans in the 1990s (and 1980s).4 The persistent recurrence of non-performing SOE loans reflected mainly the absence of a repayment culture, state interference in pricing and protracted weaknesses in their operations. Government arrears to contractors on public projects were also a significant problem, as these contractors subsequently defaulted on their loans to the SCBs.

8. Reform efforts were also hampered by a poor banking environment. The main problems were a weak legal framework and a poor credit culture (which extended beyond the SOEs). Weaknesses in the legal regime, especially with respect to contract enforcement, made the resolution of non-performing loans very difficult. Even after the court ruled in favor of the creditor, asset recovery was slow and uncertain, because the rulings were not always enforced. This clearly undermined the incentive for creditor discipline. The lack of competition has also been a major constraint on the development of a modern banking system. In addition to the poor banking environment, new entrants into the banking system have been discouraged by restrictions on the opening of branches outside of Vientiane, and a SCB monopoly on all natural resource-related banking activities.5

C. Bank Restructuring Program

9. The government’s bank restructuring program aimed to restore the financial integrity of the SCBs and develop a market-based banking system. To this end, it had three main objectives: (i) restructuring the SCBs; (ii) strengthening bank supervision; and (iii) improving the overall banking environment.6 The program was to be implemented in parallel with an SOE reform program to stem the level of non-performing loans from this source.

Restructuring the SCBs

10. The restructuring plans aimed at putting the SCBs on a sound commercial footing, with particular emphasis on reducing the level of non-performing loans. Such loans were divided into “stock” (up to December 1999) and “flow” (since January 2000). The concept was for “stock” loans to be paid mainly by the government since they were either directed by or guaranteed by the government. To this end, the government committed to a multiyear recapitalization plan that would be conditional on progress on the restructuring of the SCBs. However, the main emphasis was on improving the quality of the new loans extended by the SCBs. To this end, the government (and BOL) committed to ceasing directed lending, to enable the SCBs to base their new credit decisions on commercial criteria.

11. Implementation of the restructuring program was slower than originally envisaged. The program did not begin until 2003 when the program was formalized, with each SCB committing itself to a restructuring agenda set out in formal Governance Agreements cosigned by the Ministry of Finance and the BOL.7 The delay was costly, as the SCBs continued to extend noncommercial loans and to make losses during 2002, resulting in a further deterioration in their financial position.

12. The Governance Agreements called for the enforcement of a restricted lending regime to stop loss making activities if credit quality deteriorated. The restricted lending regime was designed to limit new lending until sound operational policies and procedures were put in place. A key feature of the regime was that SCBs whose net flow NPLs rose above 15 percent would be prohibited from increasing their risk portfolio. Each SCB was assigned a limited amount of notional capital to ensure that it could continue operations within the existing banking regulations, despite their severe capital deficiency. New lending to defaulted debtors was also prohibited. New off-balance sheet exposure had to be secured by cash deposits or issued against confirmed export letters of credit. Credit approval was to be recentralized from branches to headquarters, with the credit approval ceiling being set for each branch.

13. Two long-term international banking advisors for each SCB were recruited by the BOL to assist with the restructuring of the SCBs. They were to focus on the development and implementation of better credit policies and procedures, the formation of new organizational and committee structures, and the implementation of new operating guidelines. Credit review committees were to be established in the SCBs and the advisors were to be mandated to review and certify large loan proposals and to issue “compliance certification” if loan proposals were in full compliance with the procedures of the credit approval process and met sound commercial criteria. However, their advice and certification were not binding.

Bank Supervision

14. The second aim of the program was to strengthen supervision and regulation of the banking system. Prudential regulations on loan classification, provisioning and foreign exchange exposure were to be introduced and enforced. The program was to be supported by technical assistance from the Fund, to strengthen the central bank’s technical capacity, especially for on-site examinations and off-site monitoring.

Overall Banking Environment

15. The program also aimed to develop the financial system by increasing competition and improving the banking environment. Restrictions imposed on the banking operations of non state-owned commercial banks were to be abolished, and the banking laws were to be amended to provide for a level playing field.

16. Legal and judicial reforms to facilitate financial intermediation and the resolution of non-performing loans were also envisaged. Commercial courts were to be established to rule on cases involving disputes between creditors and debtors over loan and security contracts. Legislation was to be reformed to strengthen laws related to bankruptcy, secured transaction, and leasing. The rule of law was to be strengthened to better protect creditor rights and thus increase the number of bankable projects. Accounting standards were to be upgraded gradually to international standards.

D. Assessment of Progress

Financial Condition of the SCBs

17. The SCBs remain in a very weak financial condition, but there is some evidence that the Governance Agreements were starting to have a positive impact. In particular, the restricted lending regime that was put in place in April 2003 appears to have had a positive impact on the risk profile of the banks. The regime sharply scaled back new lending activities by the banks, especially to SOEs, and increased the banks’ focus on recovering non-performing loans. There was also an effort to improve the banks’ profitability.

18. However, there are concerns that these initial positive trends may not be sustained. In April 2004, the authorities lifted the restricted lending regime and gave the SCBs greater scope to resume lending. There was also a decision to reduce the complement of international banking advisers to allow the banks’ managements to “stand on their own feet.” Credit growth has since accelerated and there is renewed evidence of directed lending—most notably to a large domestic cement project in the south of the country. Recent audit reports have cautioned that rapid credit growth in these circumstances could lead to a further deterioration of the financial position of the SCBs.

(a) Asset Quality

19. Recent audit reports suggest that the SCBs have made some progress in improving the quality of their new lending, especially at BCEL. The level of non-performing loans on new credits approved since end-2002 has fallen to less than 2 percent at BCEL. The improvement at LDB has been less strong—the NPL ratio is still relatively high at 12 percent—and the evidence from other indicators, such as overdue loans, suggest that this may rise significantly in the future. As noted below (paragraph 22), the use of local accounting standards may also understate the true extent of the NPLs.

Quality of New Lending by BCEL and LDB
New Loans 1/NPLsOverdue 2/
(billions of Kip)(%)(%)
BCEL
- as of Dec 03118.71.19.5
- as of Dec 04199.42.413.7
- as of Jun 05 3/397.91.45.8
LDB
- as of Dec 0375.52.414.8
- as of Dec 04224.39.418.7
- as of Jun 05 3/239.912.028.2
Source: BCEL, LDB and Audit reports.

Since end-2002.

Less than 90 days.

Unaudited.

Source: BCEL, LDB and Audit reports.

Since end-2002.

Less than 90 days.

Unaudited.

20. There is also some evidence that the SCBs have exercised greater discipline in their lending to state-owned enterprises. Although SOE credits continue to account for a large share of BCEL’s loan portfolio (43 percent), the bulk of these loans have been carried over from the 1990s. New lending to SOEs has been sharply scaled back, and the management of the bank report that they no longer lend to insolvent enterprises. LDB’s exposure to SOEs is limited, amounting to less than 2 percent of its portfolio.

21. There were also increased efforts to resolve NPLs, especially at LDB. In 2003, BCEL and LDB, with the assistance of their international advisers, formulated a strategy to resolve their largest NPL accounts. The strategy met with some success. Between 2003 and 2004, LDB collected over kip 100 billion in cash from NPL accounts, with a further kip 34 billion settled through the issuance of government triangular bonds.8 LDB also wrote-off over kip 100 billion of NPLs in 2003, in an effort to clean its books. Progress at BCEL was more limited, perhaps reflecting the fact that the accounts were larger and more intractable. Cash collections on NPLs amounted to only kip 21 billion between 2003 and 2004, although a further kip 84 billion were resolved through the issuance of triangular bonds.

22. However, the total stock of NPLs remains very high. The total NPL ratio of BCEL was estimated at around 80 percent in 2004, and the bank’s external auditors suggest that if the full IFRS9 standards were used, the ratio would be closer to 95 percent. Similarly, for LDB, while the audits report that the NPL ratio had fallen to 32 percent at end-2004, the ratio would be closer to 90 percent, if the stricter IFRS standard is used.

(b) Earnings

23. While the banks have taken some steps to improve their profitability, their earnings are still weak, because a large share of their assets are non-performing. After declining between 2001 and 2003,10 BCEL reported an increase in its operating profit in 2004. The turnaround reflected partly the introduction of a new fee structure, as well as a rebound in net interest income following a pick-up in loan growth and a reduction in deposit rates. While there was some improvement in its net interest income in 2004, the LDB has continued to operate at a loss. In addition to weak net interest income, due to a high level of non-performing assets, the bank’s profitability has also been weakened by a sharp rise in operating expenses between 2001 and 2003.

(c) Capital

24. Both banks remain highly insolvent. At end-2004, the combined capital deficit of the two SCBs was estimated at kip 900 billion (4 percent of GDP). The slow progress in reducing the capital shortfall under the program largely reflects delays in the implementation of the phased recapitalization envisaged under the program, which has yet to commence. The delays reflected a reluctance by the Ministry of Finance to proceed with the recapitalization plan because of the slow progress in the operational restructuring of the banks.

Lao P.D.R.: Capital and Assets of BCEL and LDB:(In billions of kip, unless otherwise stated)
2001200220032004
BCEL
Capital-626-684-610-572
Total Assets1,2901,6311,6182,029
Capital to Total Assets (%)-49-42-38-28
LDB
Capital-242-308-320-329
Total Assets6117399461,055
Capital to Total Assets (%)-40-42-34-31
Source: Audit reports.
Source: Audit reports.

Lao P.D.R.: Operating Profit of BCEL 1/

(In millions of U.S. dollars)

1/ Excludes provisioning.

Lao P.D.R.: Operating Profit of LDB 1/

(In millions of U.S. dollars)

1/ Excludes provisioning.

25. The 2004 audit estimated that a capital injection of kip 1,200 billion (5 percent of GDP) would be needed to give the two SCBs a capital adequacy ratio of 8 percent. In August 2005, the government decided to initiate the process of recapitalizing the banks. The plan is to provide the banks with new capital of kip 634 billion—mainly in the form of bonds—in four tranches between 2005 to 2008. The first tranche of kip 200 billion, which was originally scheduled to be disbursed in September 2005, is expected shortly. The expectation is that the balance of the banks capital requirements will be met through accelerated recoveries on non-performing loans and by retained earnings as the SCBs increase their profitability.

Restructuring the SCBs

26. The authorities have made some progress in restructuring the two SCBs. In 2003, the two smaller SCBs, Lao May Bank and Lane Xang Bank were merged to form the LDB, and the new bank’s branch and staff structures have been streamlined. At BCEL, a management information system has been installed, improving communication between the branches and headquarters. Both banks have introduced new policies, with the help of the international banking advisers, to strengthen the credit appraisal and approval process and improve treasury management. The introduction of a certification process, whereby the international advisers formally review large loan proposals, has also had a positive impact on the quality of lending.

27. However, the Governance Agreements have come in for some criticism. The main criticism is that the agreements focused more on processes than quantifiable improvements in performance. Moreover, the financial benchmarks that were included—e.g., with regard to the recapitalization of the banks—were overambitious, especially as they were not backed by a consensus within government.

28. The government is in the process of drawing up revised governance agreements with the assistance of the AsDB. These agreements will seek to streamline the management structure of the banks to make managers more accountable and are expected to put greater emphasis on concrete improvements in financial performance. The international advisers will be given expanded responsibility for monitoring performance against the financial benchmarks. However, it is recognized that ultimately, progress in the restructuring of the banks will depend on the ownership and commitment to reform by the authorities, which is yet to be fully established.

Bank Supervision

29. The authorities have also made some progress in strengthening bank supervision, but much remains to be done. New regulations were issued in 2004 on foreign exchange exposure to ensure that banks maintained their exposure within prudential limits. Regulations were also issued on loan classification to ensure that banks consistently review and classify loans and set aside provisioning expenses. However, the enforcement of the new regulations has been slow. The bank supervision department has also sought to strengthen its on- and off-site supervision of banks, with the assistance of an IMF adviser. On-site inspections of SCB branches outside Vientiane have been undertaken, as well as of some private banks—although the focus of the latter has been mainly on the better-managed foreign bank branches. However, the effectiveness of the BOL’s supervisory activities continue to be weakened by severe capacity constraints and a lack of clarity about its role as an independent supervisor (paragraph 37).

Overall Banking Environment

30. The current regulatory framework does not provide the Lao banking sector with a level playing field. While the government’s stated policy is to promote a level playing field, there are still significant obstacles to the effective participation of private domestic and foreign banks in the banking system. The proposed amendments to the Banking Law, which aim to reduce barriers to entry and competition from non-SCBs, have not been enacted. In addition to the regulatory forbearance granted to the SCBs, foreign banks are restricted from expanding their branch network and are required to deposit 25 percent of their capital with the BOL with no interest. The presidential decree governing the management of foreign exchange and precious metals requires mining companies to hold bank accounts only with SCBs. The SCBs are, accordingly, still protected from the competitive pressures from non-state banks that could motivate them to improve their efficiency.

31. The authorities have taken some steps to strengthen the banking environment. Commercial courts have been established, and the SCBs have referred some cases to the courts. However, court procedures are slow, and the new institutions have had little impact on the credit culture. The Secured Transactions Law has been passed to expand the eligible loan collateral, but implementing regulations are yet to be drafted.

E. Challenges Ahead

32. There are three main challenges ahead to restructure the SCBs and strengthen the banking system: (i) improving the corporate governance of the SCBs; (ii) strengthening bank supervision; and (iii) enhancing the general banking environment.

Governance

33. Corporate governance of SCBs is still weak, hampered by the absence of a fully independent board of directors. The line between management, the central bank, and government agencies is not clear, and the system suffers from a lack of checks and balances. Although the banks’ management have focused more closely on ensuring profitability and have succeeded to some extent in improving the operating performance of the SCBs, they remain vulnerable to external pressure on important credit decisions. An additional complication is that senior staff move inter-changeably between the BOL and SCBs. This makes it difficult for the SCBs and the central bank to keep an arm’s length relationship, which has negative implications for autonomy of management as well as effective bank supervision.

34. The MOF should provide effective oversight of the SCBs, as shareholder. Until recently, the MOF was not actively engaged in overseeing the SCBs. However, it has recently set up an internal team to exercise its ownership role more effectively, and is considering sending a representative to the board of directors of the SCBs. The MOF needs to monitor the operations of the SCBs closely to determine if the phased recapitalization of the SCBs should be implemented as scheduled. The government should also consider introducing independent directors from the private sector outside the SCBs to the boards of the SCBs. The government representative and other independent directors could employ the international banking advisors and financial benchmarks to monitor the management’s performance.

35. The international advisors should continue to play an important role in the bank restructuring process. The role of the advisors could be made clearer by giving them a mandate to monitor financial benchmarks under the revised Governance Agreements. Although the bank staff’s understanding of credit policies and banking business has improved with the help of the advisors, technical capacity needs to be strengthened further. One further possibility is to introduce professional management from abroad, which has proven to be very effective in some transition economies, e.g., in Mongolia.

36. The structural weaknesses in the SCBs could be overcome by introducing strategic investors to the SCBs, especially if they held a majority share. Central European countries such as Hungary and Poland ultimately succeeded in reforming their state-owned banks after a majority of shares were sold to foreign strategic investors. In China and Vietnam, foreign investment is being gradually allowed, starting with small minority stakes. In addition to strengthening the governance of the SCBs, capital and human resources also need to be reinforced.

Bank Supervision

37. The main priority is to enhance the BOL’s prudential oversight of the banking system. In addition to continuing to build up the BOL’s technical capacity in on- and off-site supervision, the framework of banking regulations needs to be strengthened to reduce the scope of regulatory forbearance, especially in the area of single borrower exposures. The latter is particularly important as it would help reduce the BOL’s day-to-day intervention in credit decisions and help more clearly define its role as a bank regulator.11

Banking Environment

38. Steps to increase competition and provide a level playing field for all participants in the banking system are needed to support the country’s economic development. The banking act and the presidential decree preventing the expansion of operations of foreign banks should be amended to promote competition and stimulate SCB reforms. The provision of a level playing field is also crucial to attract foreign direct investment in the banking sector.

39. Further reforms in the areas of bankruptcy, property and land laws are needed to deepen financial intermediation. Banking infrastructure including credit information, collateral registration, payment system, and inter-bank markets need to be developed. Assistance from the international community will be required to complete this agenda. The reform measures are of critical importance since the country’s future development will require a well-functioning banking system.

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Table 1.Lao P.D.R.: Real GDP by Industrial Origin, 2000–2004:(In billions of kip; at 1990 constant market prices)
2000200120022003 1/2004 1/
Est.
Agriculture584606630644666
Crops347361373373388
Livestock and fishery202207217227234
Forestry3538404344
Industry254280308344387
Mining and quarrying5662221
Manufacturing189212239254289
Construction2529273038
Electricity, gas, and water3534363739
Services281297314337363
Transportation, storage, and
communication6571778492
Wholesale and retail trade105114123136149
Banking, insurance, and real estate910565
Ownership of dwellings3334353637
Public wage bill3334394041
Nonprofit institutions98889
Hotels and restaurants2525262428
Other22223
GDP at factor cost1,1191,1831,2531,3241,415
Import duties89101113
GDP at market prices1,1271,1921,2631,3351,428
Source: Data provided by the Lao P.D.R. authorities.

Differ from Fund staff estimates.

Source: Data provided by the Lao P.D.R. authorities.

Differ from Fund staff estimates.

Table 2.Lao P.D.R.: Real GDP Growth, 2000–2004:(In percent)
20002000200120022003 1/2004 1/
WeightsEst.
Agriculture52.14.93.84.02.23.5
Crops31.013.24.13.50.04.0
Livestock and fishery18.12.32.54.64.93.0
Forestry3.1-33.68.15.18.61.3
Industry22.78.510.110.111.512.5
Mining and quarrying0.51.41.210.1267.5-5.1
Manufacturing16.97.212.113.06.313.7
Construction2.3-9.213.0-6.512.924.6
Electricity, gas, and water3.139.0-1.36.31.25.3
Services25.24.95.75.77.27.5
Transportation, storage, and
communication5.89.08.68.49.39.5
Wholesale and retail trade9.45.08.97.510.79.2
Banking, insurance, and real estate0.8-35.712.7-46.314.0-24.0
Ownership of dwellings3.02.52.52.52.52.5
Public wage bill3.07.11.615.03.41.0
Nonprofit institutions0.87.5-12.54.27.07.4
Hotels and restaurants2.316.5-1.22.7-5.016.5
Other2.328.9-1.52.68.716.1
GDP at factor cost100.05.75.75.95.76.9
Import duties0.720.415.812.68.914.5
GDP at market prices100.75.85.85.95.86.9
Source: Data provided by the Lao P.D.R. authorities.

Differ from Fund staff estimates.

Source: Data provided by the Lao P.D.R. authorities.

Differ from Fund staff estimates.

Table 3.Lao P.D.R.: Nominal GDP by Industrial Origin, 2000–2004:(In billions of kip)
2000200120022003 1/2004 1/
Est.
Agriculture7,1277,9759,17410,82912,378
Crops4,2334,7505,4396,2807,216
Livestock and fishery2,4682,7273,1563,8244,350
Forestry427497578725811
Industry3,1063,6874,4925,7837,190
Mining and quarrying677389378397
Manufacturing2,3062,7873,4834,2775,373
Construction309377390508700
Electricity, gas, and water423450530619720
Services3,3303,8994,5545,7036,785
Transportation, storage, and
communication7949301,1151,4081,703
Wholesale and retail trade1,2841,5071,7922,2922,764
Banking, insurance, and real estate1051287610084
Ownership of dwellings406449509603682
Public wage bill393517643822957
Nonprofit institutions1211121515
Hotels and restaurants309329374423528
Other2628324151
Import duties107141182211237
GDP at market prices13,66915,70218,40122,52526,590
Source: Data provided by the Lao P.D.R. authorities.

Differ from Fund staff estimates.

Source: Data provided by the Lao P.D.R. authorities.

Differ from Fund staff estimates.

Table 4.Lao P.D.R.: Output of Major Commodities, 2000–2004
ItemUnit20002001200220032004
Agriculture
Paddythousand tons2,2302,3352,4172,3752,529
Cornthousand tons117111124143204
Sweet potatoes and cassavathousand tons52101111150175
Coffeethousand tons255631633663671
Tobaccothousand tons1826322223
Livestock
Buffalothousand heads1,0071,0521,11311,1131,112
Cattlethousand heads9871,2181,2091,2451,249
Pigsthousand heads1,1011,4271,4161,6551,728
Goats and sheepthousand heads100123126138139
Poultrythousand heads12,02814,06515,27519,47519,481
Forestry
Logsthousand m3378239
Industry
Tintons800816
Gypsumthousand tons1851509998236
GoldKg8,9007,000
Manufacturing
Hydropowermillion kwh3,6783,5903,59033,1793,347
Beerthousand hectoliter508577652702827
Soft drinksthousand hectoliter143142148164187
Cigarettesmillion packs4141556884
Agricultural toolsthousand units44444
Detergenttons900700700710860
Nailstons650740745760900
Oxygenthousand bottles2121212123
Electric cordthousand m2,000
Plastic productstons3,8504,3504,4204,5305,500
Saltthousand tons1921222225
Wood furnituremillion kip12,70015,24015,35015,550
Rattan furnituremillion kip275320345350430
Garmentsmillion pieces2432333437
Sugartons300265562450
Tobaccothousand tons1,1003585939471,897
Plywoodmillion sheets2,1002,2002,2501,5501,300
Cementthousand tons7575263280282
Bricksmillion pieces66878990120
Woodthousand meters240230235198
Ventilatorsthousand pieces400465320330340
Source: Data provided by the Lao P.D.R. authorities.
Source: Data provided by the Lao P.D.R. authorities.
Table 5.Lao P.D.R.: Consumer Price Indices, 2001—2005
20012002200320042005
(NSC Index; December 1999 = 100)
January111.8119.8138.2155.6168.1
February112.6120.7139.6157.6168.7
March113.0121.1142.7159.8170.1
April114.8123.3145.3162.6173.0
May116.2124.0146.6164.7174.5
June116.1126.7147.8166.4175.4
July117.3130.5150.0168.2177.1
August120.0135.1155.2169.5180.6
September120.8138.4158.5170.2183.2
October120.8138.1158.0168.7184.6
November119.8136.6155.3168.0182.6
December118.9136.9154.2167.6182.3
(Twelve-month percentage change)
January10.17.215.412.68.1
February9.07.215.612.97.0
March8.47.217.911.96.5
April7.87.417.811.96.4
May7.96.718.212.45.9
June6.79.116.712.65.4
July6.911.215.012.15.3
August8.112.614.99.26.6
September6.314.614.57.47.7
October7.114.314.56.89.4
November8.214.013.78.18.7
December7.515.212.68.78.8
Period average7.810.615.510.57.2
Source: Data provided by the Lao P.D.R. authorities.
Source: Data provided by the Lao P.D.R. authorities.
Table 6.Lao P.D.R.: Consumer Price Indices Components, 2003-2005:(Twelve-month percentage change)
Weight200320042005
Mar.Jun.Sept.Dec.Mar.Jun.Sept.Dec.Mar.Jun.Sept.Dec.
Foods46.213.615.018.714.414.513.64.07.55.54.89.412.0
Rice, bread, flour, and other cereals14.710.717.736.825.123.916.3-7.7-1.9-4.3-2.29.517.5
Meats, poultry, and fish12.117.313.67.57.210.718.421.019.214.07.98.210.0
Fish4.411.17.72.88.612.817.220.212.78.49.47.87.5
Dairy products and egg0.910.08.22.87.511.927.435.734.229.121.011.38.7
Fruit and vegetables5.312.813.15.36.99.22.40.67.510.912.213.713.5
Sugar, sweets, and spices2.913.913.67.99.36.55.83.75.04.14.86.64.9
Meals4.219.219.919.315.36.57.74.78.611.49.012.18.9
Other drink1.48.811.011.09.411.313.012.111.46.02.42.02.2
Alcoholic beverages and tobacco6.42.84.910.010.310.310.75.73.52.60.91.23.1
Alcoholic beverages4.04.44.18.39.18.99.24.53.95.03.93.53.5
Tobacco2.40.36.012.612.212.513.17.52.9-1.1-3.6-2.22.6
Clothing and foot wear4.913.711.08.28.77.78.38.66.87.08.07.19.0
Men’s clothing1.310.08.87.59.110.512.314.310.910.59.26.410.1
Ladies’ clothing1.314.111.85.76.14.34.35.43.62.22.32.33.9
Children’s clothing1.213.410.87.77.75.75.35.54.15.39.68.911.3
Foot wear0.813.812.213.214.412.412.28.87.79.611.512.011.6
Housing3.885.556.220.219.521.021.118.614.48.64.62.33.0
Rent, water, and sewerage charges0.31.40.415.615.046.347.346.643.015.015.11.42.6
Housing maintenance & repair1.542.511.610.06.75.94.34.65.75.35.94.24.6
Fuel and power1.9127.294.425.025.325.526.121.915.69.23.41.82.5
Household goods8.117.917.09.96.86.06.07.58.68.28.99.79.1
Household furniture1.620.217.414.110.06.96.95.08.711.314.020.616.2
Household textiles1.016.014.29.97.27.47.07.59.86.77.48.18.3
Household appliances1.422.619.410.25.14.64.62.92.22.92.21.53.0
Glass & tableware & utensils0.84.44.73.73.41.33.14.87.79.810.19.99.2
Household operation3.318.719.98.86.36.96.311.911.38.79.07.57.7
Medical care3.87.47.49.314.018.117.814.810.34.72.01.10.7
Transport and communications17.916.514.88.710.56.612.210.811.39.27.710.28.5
Personal transport15.710.713.911.513.69.212.711.112.09.89.412.68.8
Public transport1.842.917.2-0.9-2.1-4.810.19.710.58.71.61.38.1
Communications0.436.423.40.712.012.510.410.3-0.6-1.00.20.71.2
Recreation, education, and printed matter4.714.112.39.09.58.07.87.36.95.44.92.12.6
Recreation and education4.214.512.99.910.68.98.77.46.75.04.31.82.7
Books, newspapers, and supplies0.510.47.31.60.40.80.85.99.28.89.94.21.0
Personal care and effects4.227.219.510.69.76.57.57.08.35.75.96.48.1
Total100.017.916.714.512.611.912.67.48.76.55.47.78.8
Source: Data provided by the Lao P.D.R. authorities.
Source: Data provided by the Lao P.D.R. authorities.
Table 7.Lao P.D.R.: General Government Operations, 2000/01-2004/05
2000/012001/022002/032003/042004/05
Authorities’ est.
(In billions of kip)
Revenue and grants2,4762,6832,7943,1033,691
Revenue2,0002,3242,3412,8213,284
Tax1,6291,8751,9242,3282,700
Nontax372449417493584
Grants476359453283407
Expenditure3,1413,2684,0173,9674,958
Current1,1231,2801,5271,8902,350
Wage bill5377038401,0761,329
Wages, salaries and benefits4105476688331,077
Compensations and allowances127156172243252
Subsidies and transfers116109169124200
Interest payments134138123235290
of which: external117108115194267
Other recurrent336330394456530
Capital and onlending1,9111,7852,3701,8532,232
Domestically financed 1/8729951,026799484
Externally financed1,2009311,4991,1691,878
Onlending (net)-160-141-156-115-130
Debt repayment/Contingency107203120224377
Overall balance-665-585-1,222-864-1,267
Financing6655851,2228641,267
Domestic financing (net)253-23097-5916
Bank financing 2/246-23492-662
Nonbank financing745613
Foreign financing (net) 3/4/5454091,1089231,254
Disbursements7926911,3091,1511,550
Amortization-247-282-201-228-296
Discrepancy/Financing gap180-3
(In percent of GDP)
Revenue and grants16.315.113.012.112.6
Revenue13.213.2110.911.011.2
Tax10.710.68.99.19.2
Nontax2.42.51.91.92.0
Grants3.12.02.11.11.4
Expenditure20.718.418.615.516.9
Current7.47.27.17.48.0
Wagebill3.54.03.94.24.5
Wages, salaries and benefits2.73.13.13.33.7
Compensations and allowances0.80.90.81.00.9
Subsidies and transfers0.80.60.80.50.7
Interest payments0.90.80.60.91.0
of which: external0.80.60.50.80.9
Other recurrent2.21.91.81.81.8
Capital and onlending12.610.111.07.37.6
Domestically financed 1/5.75.64.83.11.6
Externally financed7.95.37.04.66.4
Onlending (net)-1.1-0.8-0.7-0.5-0.4
Debt repayment/Contingency0.71.10.60.91.3
Overall balance-4.4-3.3-5.7-3.4-4.3
Financing4.43.35.73.44.3
Domestic financing (net)1.7-1.30.4-0.20.1
Foreign financing (net) 3/4/3.62.35.13.64.3
Discrepancy/Financing gap0.00.00.10.00.0
Memorandum items:
GDP (in billions of kip)15,19417,72621,54925,55529,313
Bank restructuring bonds 5/00139108
Exchange rate (Kip per US dollar)8,5869,81010,63610,59410,604
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.

In 2003/04 includes discrepancy.

Excludes bank restructuring bonds.

In 2001/02 includes a transfer of $33 million from EDLto the government from the Theun-Hinboun Power Company refinancing.

Foreign financing does not include loans for government equity contribution to the NT2 project.

In 2002/03 and 2003/04 the bonds were Debt Clearance Bonds issued to state banks to settle budget obligations to contractors with NPLs. In 2004/05 includes bank recapitalization bonds.

Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.

In 2003/04 includes discrepancy.

Excludes bank restructuring bonds.

In 2001/02 includes a transfer of $33 million from EDLto the government from the Theun-Hinboun Power Company refinancing.

Foreign financing does not include loans for government equity contribution to the NT2 project.

In 2002/03 and 2003/04 the bonds were Debt Clearance Bonds issued to state banks to settle budget obligations to contractors with NPLs. In 2004/05 includes bank recapitalization bonds.

Table 8.Lao P.D.R.: General Government Revenue, 2000/01–2004/05
2000/012001/022002/032003/042004/05
Authorities’ est.
(In billions of kip)
Revenue2,0002,3242,3412,8213,284
Tax1,6291,8751,9242,3282,700
Profit tax205239221222252
Income tax145125140179217
Turnover tax318375466594656
Excise tax371286293483497
Import duties179240316351423
Timber royalty receipts182362218225190
Natural Resource Tax2417233292
Hydro royalties5146453257
Other Fees6192107129208
Other92939481108
Nontax372449417493584
SOE dividends678487106178
Overflight revenues114187174202222
Other190177156185185
(In percent of GDP)
Revenue13.213.2110.911.011.2
Tax10.710.68.99.19.2
Profit tax1.41.41.00.90.9
Income tax1.00.70.60.70.7
Turnover tax2.12.12.22.32.2
Excise tax2.41.61.41.91.7
Import duties1.21.41.51.41.4
Timber royalty receipts1.22.01.00.90.6
Natural Resource Tax0.20.10.10.10.3
Hydro royalties0.30.30.20.10.2
Other0.60.50.40.30.4
Nontax2.42.51.91.92.0
SOE dividends0.40.50.40.40.6
Overflight revenues0.81.10.80.80.8
Other1.31.00.70.70.6
Memorandum item:
GDP (in billions of kip)15,19417,72621,54925,55529,313
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.
Table 9.Lao P.D.R.: General Government Expenditures, 2000/01–2004/05
2000/012001/022002/032003/042004/05
Authorities’ est.
(In billions of kip)
Expenditure3,1413,2684,0173,9674,958
Current1,1231,2801,5271,8902,350
Wagebill5377038401,0761,329
Wages, salaries and benefits4105476688331,077
Salaries230396493683
Remuneration180152175150
Compensations and allowances127156172243252
of which: social welfare29344063
Subsidies and transfers116109169124200
Interest payments134138123235290
Domestic173094123
External117108115194267
Other recurrent336330394456530
Capital and onlending1,9111,7852,3701,8532,232
Domestically financed8729951,026799484
Externally financed1,2009311,4991,1691,878
Onlending (net)-160-141-156-115-130
Debt repayment107203120224377
(In percent of GDP)
Expenditure20.718.418.615.516.9
Current7.47.27.17.48.0
Wagebill3.54.03.94.24.5
Wages, salaries and benefits2.73.13.13.33.7
Salaries1.52.22.32.7
Remuneration1.20.90.80.6
Compensations and allowances0.80.90.81.00.9
of which: social welfare0.20.20.20.2
Subsidies and transfers0.80.60.80.50.7
Interest payments0.90.80.60.91.0
Domestic0.10.20.00.20.1
External0.80.60.50.80.9
Other recurrent2.21.91.81.81.8
Capital and onlending12.610.111.07.37.6
Domestically financed5.75.64.83.11.6
Externally financed7.95.37.04.66.4
Onlending (net)-1.1-0.8-0.7-0.5-0.4
Debt repayment0.71.10.60.91.3
Memorandum item:
GDP (in billions of kip)15,19417,72621,54925,55529,313
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.
Table 10.Lao P.D.R.: Monetary Survey, 2001–2005 1/
20012002200320042005
Mar.Jun.Sept.Dec.Mar.Jun.Sept.Dec.Mar.Jun.Sept.
(In billions of kip; end of period)
Net foreign assets1,4852,3262,4922,6622,5642,7242,9633,2983,1153,3213,4163,3313,021
Bank of Lao P.D.R.9151,6121,7231,7711,6111,7971,7562,0221,9811,9891,9722,1412,074
Commercial banks5707137708919539271,2071,2761,1341,3331,4441,190947
Net domestic assets1,2171,1101,1911,1361,3691,3711,5071,3261,6981,7071,8411,8072,182
Domestic credit2,4362,2592,3182,1342,3512,3232,3912,1962,5172,4662,7152,4932,896
Net claims on government-117-379-369-401-189-131-166-373-162-210-109-211-111
Credit to the economy2,5532,6382,6862,5352,5402,4542,5572,5692,6782,6762,8242,7033,007
of which : in foreign currency2,0642,2402,2762,1552,1752,0832,1642,2092,3302,2722,4022,2512,515
Credit to private sector1,5321,5051,6171,5351,5441,4801,5711,5521,6831,6771,8521,9582,296
of which : in foreign currency1,1251,1371,2351,1791,2021,1261,1951,2051,3461,2871,4421,5171,818
Credit to state enterprises1,0211,1331,0691,0009969749871,017995999972745711
of which : in foreign currency9391,1041,0419769739579691,004984986959733696
Other items (net)-1,219-1,150-1,127-998-983-953-884-870-819-759-874-685-714
Broad money2,7023,4353,6833,7983,9334,0954,4714,6234,8135,0295,2575,1385,203
Narrow money3664936115636076998477818591,0491,2611,1701,189
Currency outside banks105135108105122262306316350511578579613
Demand deposits261358503458485437541465509537683591577
Quasi-money2,3372,9423,0723,2343,3253,3963,6233,8423,9533,9803,9963,9694,014
Time and savings deposits308452513621723762813897919897853864879
Foreign currency deposits2,0292,4902,5592,6132,6022,6342,8112,9453,0343,0833,1433,1053,135
(Annual percentage change)
Domestic credit69.3-7.30.97.07.62.83.22.97.06.113.513.515.1
Credit to the economy37.43.310.65.5-3.0-7.0-4.81.35.49.010.45.212.3
Broad money20.227.028.325.221.719.221.321.722.422.817.611.18.1
Memorandum items:
Exchange rate
(kip/US$; end of period, annual percentage change)15.511.912.36.4-3.2-1.4-2.01.13.70.00.20.8-0.1
Money multiplier3.33.23.33.13.33.03.13.23.13.33.23.13.1
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.

Valued at current exchange rates.

Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.

Valued at current exchange rates.

Table 11.Lao P.D.R.: Balance Sheet of the Bank of the Lao P.D.R., 2001–2005 1/
20012002200320042005
Mar.Jun.SeptDec.Mar.Jun.SeptDec.Mar.Jun. 2/Sept
(In billions of kip; end of period)
Net foreign assets9151,6121,7231,7711,6111,7971,7562,0221,9811,9891,9722,1412,074
Foreign assets1,2662,0772,1562,1882,0712,2572,1962,4432,3872,3802,3392,4892,423
Foreign liabilities-351-464-433-417-460-459-440-421-407-392-367-348-350
Net domestic assets-93-538-609-538-426-428-329-582-425-447-307-460-404
Net domestic credit891550451434498440489302504409535114167
Net claims on government-96-411-426-432-364-375-356-552-360-451-302-401-355
of which: in FC-141-419-422-434-330-350-293-459-327-353-238-346-365
Claims on government185239226232226234219233203186216266295
of which: in FC6410496961029064727371704258
Government deposits-281-650-652-664-589-609-575-785-563-637-518-667-650
of which: in FC-204-523-518-530-432-439-357-531-400-424-308-389-424
Claims on state enterprises488567558551548524555565570575559237237
of which: in FC488566558551547523554565570575559237237
Claims on private sector151176176175175153153155156154151150140
of which: in FC150176173173173152152154156153151150140
Claims on other banking institutions348218143139139138139134138131128128145
of which: in FC2341022828262626232019191918
BOL securities-200-166-129-62-96-46-38000000
Other items (net)-784-922-930-910-829-823-780-884-929-855-842-574-572
Government lending funds-347-428-421-419-362-324-349-368-369-357-342-341-349
Other items-437-494-509-491-466-499-430-516-559-498-500-233-223
Reserve money8221,0741,1141,2321,1841,3691,4271,4401,5561,5421,6651,6811,669
of which: in kip241302342435475581606599709724836841875
Currency in circulation (in kip)105135108105122262306316350511578579613
Vault cash (in kip)394773888663961109881126133102
Bank deposits6788939331,0399761,0441,0251,0141,107950960969955
of which: in kip97120161241267256203173261132132130160
Required reserves329477493533531525554000000
of which: in kip54607482928390000000
Excess reserves (clearing deposits in kip)446087160175172113173261132132130160
Other deposits (in FC)306355352346270346358841847821811841795
Capital deposits166191175140139135133136143152153206214
Clearing deposits 3/138164176206132211225705703666658634581
Private sector demand deposits2011000013011
(In millions of U.S. dollars)
Net foreign assets of BOL (a)96152163168154172169190183190183199191
Forex component of reserve money (b)61737376687579797878807873
Net official international reserves (= (a) - (b) )35799092869690111105112104121118
Source: Data provided by the Lao P.D.R. authorities.

Valued at current exchange rates.

Includes debt write-offs on NPLs to SOEs (amounting to Kip 320 billion), reflected in a decrease in claims on state enterprises and a corresponding adjustment in provisioning under other items.

From May 2004, includes required reserves.

Source: Data provided by the Lao P.D.R. authorities.

Valued at current exchange rates.

Includes debt write-offs on NPLs to SOEs (amounting to Kip 320 billion), reflected in a decrease in claims on state enterprises and a corresponding adjustment in provisioning under other items.

From May 2004, includes required reserves.

Table 12.Lao P.D.R.: Summary Balance Sheet of All Commercial Banks, 2001–2005 1/
20012002200320042005
Mar.Jun.Sept.Dec.Mar.Jun.Sept.Dec.Mar.Jun.Sept.
(In billions of kip; end of period)
Net foreign assets5707137708919539271,2071,2761,1341,3331,4441,190947
Foreign assets1,0431,5771,6101,7571,6531,7171,9622,1512,1202,3212,4562,1932,197
Foreign liabilities-473-864-840-865-700-790-755-876-986-989-1,012-1,003-1,249
Net domestic assets2,0272,5872,8052,8012,8572,9062,9573,0323,3283,1843,2353,3703,643
Net domestic credit1,8931,9282,0101,8391,9922,0212,0412,0282,1512,1882,3082,5072,874
Net claims on government-21325731175244190179198241194190243
Claims on government2869104110249324300334374356365376452
Government deposits-49-37-41-79-75-81-109-156-175-115-171-186-209
of which: in FC-29-16-32-63-52-58-51-91-100-53-85-112-117
of which: in kip-20-21-15-15-23-22-58-65-75-62-86-74-92
Claims on state enterprises533566511449448451432452425423413508475
of which: in FC451537483425426434415439415411401496460
Claims on private sector1,3821,3291,4411,3591,3701,3271,4181,3971,5271,5241,7011,8092,156
of which: in FC9749611,0621,0061,0299741,0431,0511,1901,1331,2911,3681,678
Other items (net)1346607959628658849161,0041,177996927863769
Credit from monetary authorities-386-252-176-181-173-166-164-163-103-98-94-94-93
Other liabilities-394-172-176-179-336-352-338-283-349-447-522-530-505
Capital account-578-487-417-340-259-201-162-109-88-47-70-137-193
Restricted deposits0-24-41-21-25-20-72-20-20-22-20-22-41
Other assets767656611561516523551487551622588598580
Reserves7269419951,1231,1421,1011,1021,0921,1879891,0461,0481,021
Deposits2,5983,3013,5753,6923,8113,8324,1644,3074,4624,5174,6794,5604,591
Kip deposits5698101,0161,0791,2091,1981,3531,3631,4281,4351,5351,4551,456
Current deposits261358503458485437541465509537683591577
Time and savings deposits308452513621723762813897919897853864879
Foreign currency deposits2,0292,4902,5592,6132,6022,6342,8112,9453,0343,0833,1433,1053,135
(In millions of U.S. dollars; end of period)
Net foreign assets60677385918911612010512713911187
Foreign currency deposits214234242248249252271277280295302289289
Memorandum item:
NFA coverage of foreign currency deposits (percent)28.128.630.134.136.635.242.943.337.443.245.938.330.2
Source: Data provided by the Lao P.D.R. authorities.

Valued at current exchange rates.

Source: Data provided by the Lao P.D.R. authorities.

Valued at current exchange rates.

Table 13.Lao P.D.R.: Summary Balance Sheet of State-owned Commercial Banks, 2001–2005 1/2/
20012002200320042005
Mar.Jun.Sept.Dec.Mar.Jun.Sept.Dec.Mar.Jun.Sept.
(In billions of kip; end of period)
Net foreign assets306489571623606565863965863984989741629
Foreign assets4981,0061,0159979018751,1621,2921,1871,3201,3101,056988
Foreign liabilities192517444374294310299328323335322315359
Net reserves160400544626666642620639701502515460434
Reserves416516585667706675655673730531539483458
Credit from monetary authorities2561164141403335343029242424
Claims on government (net)-23-212-13138201175150137177135128126
Claims in kip5144450189259226241236230219240243
Claims in foreign currency-28-16-32-63-51-58-51-91-99-53-85-111-117
Net domestic assets (excl. net credit to government)1,5671,5931,5441,5281,3831,4131,3581,4201,5161,5291,6881,8071,936
Credit to the economy1,3041,2241,2091,1211,0009519729871,0761,0351,2001,3261,447
of which: in foreign currency1,0191,0281,0089528578178238308998229741,0901,170
Credit to state enterprises419449404348330331315313280277277348306
Credit to private sector8857768057736706206576747967579239791,141
Other items (net)263368335407384462387433440495489481489
Deposits2,0092,4802,6712,7642,7932,8223,0173,1733,2173,1933,3273,1363,125
Deposits in kip4326057688239179031,0231,0181,0461,0281,081980957
Deposits in foreign currency1,5781,8751,9031,9411,8771,9191,9932,1562,1712,1652,2462,1562,168
(In millions of U.S. dollars; end of period)
Net foreign assets32465459585483918094956958
Foreign currency credit to the economy10797959082787978837994102108
Foreign currency net credit to government-3-2-3-6-5-6-5-9-9-5-8-10-11
Foreign currency deposits166177180184179183192202200207216201200
(Annual percentage change)
Credit to the economy (excl. credit to government)47.8-6.13.1-4.7-17.5-22.3-19.7-12.07.78.823.534.434.5
of which: in foreign currency54.21.013.72.8-14.2-20.6-18.4-12.94.90.618.431.430.2
Deposits17.423.427.223.519.113.812.914.815.213.110.3-1.2-2.9
Memorandum items:
Issue of debt clearance bonds, accumulative stocks (Kip billions)0.00.00.00.0137.1207.8207.8207.8244.2244.2244.2244.2244.2
NFA coverage of FC deposits (percent)19.426.130.032.132.329.543.344.739.845.544.034.429.0
Reserves to deposits ratio0.20.20.20.20.30.20.20.20.20.20.20.20.1
Exchange rate (kip/USS; end of period)9,49010,62010,59010,53010,46010,47010,38110,64910,85010,46510,40010,73510,843
Source: Data provided by the Lao P.D.R. authorities.

Comprises Banque pour le Commerce Extérieur (BCEL) and Lao Development Bank (LDB).

Valued at current exchange rates.

Source: Data provided by the Lao P.D.R. authorities.

Comprises Banque pour le Commerce Extérieur (BCEL) and Lao Development Bank (LDB).

Valued at current exchange rates.

Table 14.Lao P.D.R.: Interest Rates, 2000–2005
200020012002200320042005
Jun.Sept.
(In percent; end of period)
Local banks (representative rates) 1/
Deposit rates
Savings (U.S. dollar accounts)3.02.01.00.40.30.40.5
Fixed (U.S. dollar accounts)
3 months4.02.51.50.50.40.50.8
6 months5.03.01.80.60.80.81.0
12 months6.03.52.30.81.01.01.0
Savings (Kip accounts)12.012.015.012.05.03.03.0
Fixed (Kip accounts)
3 months15.016.017.015.08.05.05.0
6 months20.018.019.018.09.07.07.0
12 months24.010.0010.010.010.08.08.0
Lending rates
Overdraft
Kip30.024.024.028.021.020.020.0
Baht12.010.010.012.012.012.012.0
U.S. dollar11.011.011.011.012.012.012.0
Foreign banks (representative rates) 2/
Deposit rates
Savings (U.S. dollar accounts)1.00.50.50.50.30.30.3
Fixed (U.S. dollar accounts)
3 months1.01.01.01.00.50.50.5
6 months1.51.01.01.00.50.50.5
12 months3.02.02.02.00.80.80.8
Lending rates
Overdraft
Kip23.022.022.022.022.022.022.0
Baht17.014.014.014.013.013.013.0
U.S. dollar13.011.011.011.010.510.510.5
Source: Data provided by the Lao P.D.R. authorities.

Local banks representative rates are from BCEL.

Foreign banks representative rates are from THMB.

Source: Data provided by the Lao P.D.R. authorities.

Local banks representative rates are from BCEL.

Foreign banks representative rates are from THMB.

Table 15.Lao P.D.R.: Balance of Payments, 2000–2004:(In millions of U.S. dollars; unless otherwise indicated)
20002001200220032004
Est.
Current account-183-146-131-174-361
Excluding official transfers-299-209-180-237420
Merchandise trade balance-376-288-263-244-478
Exports, f.o.b.342362370450500
Imports, c.i.f.718650633694977
Services (net)13212513195132
Income (net)-75-67-70-113-101
of which: interest payments 1/-38-35-29-38-54
of which: public debt-11-11-10-15-27
Transfers (net)13685718785
Private2122232426
Official11563486360
Capital account227145187196379
Medium- and Long-Term Loans6366127120275
Disbursements 2/99105165176346
Amortization-36-39-38-56-70
of which: public debt-20-25-27-28-29
Foreign direct investment3124603998
Net foreign assets of commercial banks (increase -)2528-7-21-39
Other private flows and errors and omissions1082765845
Overall balance44-1552218
Financing-441-55-22-18
Central bank net foreign assets-441-55-22-18
Assets (increase -)-336-62-18-12
Liabilities (reduction -)-10-57-4-6
Memorandum items:
Current account (percent of GDP)
(excluding official transfers)-17.2-11.9-9.9-11.1-16.8
Gross official reserves
(in millions of U.S. dollars)127134196214227
(in months of goods and services imports)2.22.43.03.73.4
Public debt service ratio
(in percent of exports of goods and services)5.87.27.16.77.5
Nominal GDP at market prices (US$ million)1,7401,7621,8182,1382,501
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.

Includes debt service to official creditors and estimates for debt service to commercial creditors.

Includes private sector loans.

Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.

Includes debt service to official creditors and estimates for debt service to commercial creditors.

Includes private sector loans.

Table 16.Lao P.D.R.: Merchandise Trade by Major Commodity, 2000–2004:(In millions of U.S. dollars; unless otherwise indicated)
20002001200220032004
Est.
Merchandise Exports342.1361.8370.1450.1499.6
Gold0.00.00.060.157.8
Electricity112.2106.4103.686.691.1
Timber70.1106.7114.2128.2144.9
Garments105.9112.9113.9129.9154.7
Coffee12.114.917.111.214.4
Other41.820.921.334.236.8
Merchandise Imports717.8650.3633.1693.7977.2
Petroleum159.987.2100.689.6107.6
Capital Goods236.3226.9197.1271.6467.6
Garments Materials62.582.379.986.6115.5
Electricity5.86.55.06.818.2
Other253.2247.5250.5239.1268.4
Trade Balance-375.7-288.5-263.0-243.6-477.6
(in percent of GDP)21.616.414.511.419.1
Memorandum Items:
Export volume growth (goods and services; percent)8.61.1-3.65.6
Import volume growth (goods and services; percent)-5.6-6.517.028.2
Terms of trade (percent change)-2.7-1.66.80.8
Gold volume (000s oz.)0.00.00.0165.2141.2
Electricity exports (GWh)2,961.92,870.42,751.42,285.02,424.0
Electricity imports (GWh)160.0182.0200.7229.3277.6
Sources: Lao P.D.R. authorities, Eurostat, Comtrade, and Fund staff estimates.
Sources: Lao P.D.R. authorities, Eurostat, Comtrade, and Fund staff estimates.
Table 17.Lao P.D.R.: External Aid and Loan Disbursements, 2000–2004:(In millions of U.S. dollars)
20002001200220032004
Grants 1/115.063.247.763.059.5
Bilateral114.663.043.061.056.4
Program grants0.02.812.012.312.6
Project grants114.660.231.048.743.8
Of which: Technical assistance22.111.27.76.0
Multilateral0.40.24.72.03.2
UN agencies0.10.03.61.80.1
AsDB0.00.00.20.10.4
Other (including NGOs)0.30.20.80.12.6
Loan disbursements98.3105.1105.0128.9113.8
Program loans11.30.05.022.012.3
IDA0.00.00.07.012.3
AsDB11.30.05.015.00.0
Project loans87.0105.1100.0106.9101.5
AsDB37.751.936.046.051.8
IDA26.836.447.839.627.5
IFAD2.54.25.53.03.8
OPEC4.63.91.82.02.6
Nordic Fund2.56.81.11.46.0
OECF0.00.42.20.00.0
Other12.91.55.614.99.7
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.

Includes project related and general technical assistance.

Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.

Includes project related and general technical assistance.

Table 18.Lao P.D.R.: International Reserves, 2000–2004:(In millions of U.S. dollars)
20002001200220032004
Net foreign assets of the banking system185.9150.3219.0260.2317.4
Foreign assets270.6253.5344.1379.5449.3
Foreign liabilities84.7103.2125.1119.4131.9
Central bank net foreign assets97.295.6151.8171.7190.0
Foreign assets139.6133.5195.6215.5227.5
Foreign liabilities42.337.943.743.937.4
Commercial banks’ net foreign assets88.754.767.288.5127.4
Foreign assets131.1120.0148.5164.0221.8
Foreign liabilities42.365.381.375.594.5
Source: Data provided by the Lao P.D.R. authorities.
Source: Data provided by the Lao P.D.R. authorities.
Table 19.Lao P.D.R.: Debt Stock and Debt Service, 2000–2004 1/:(In millions of U.S. dollars)
20002001200220032004
Est.
Total debt stock (public and private)1,4471,4581,6142,1712,530
Public debt1,1791,2131,3301,9152,086
Bilateral official796864437453
of which: Russian Federation387387
Multilateral1,0421,0891,08911,3381,516
of which:
AsDB541575603715754
IDA394407435485618
IMF4837434638
Commercial585675140117
Private debt268245284257444
Total debt service81847691120
Amortization4349475670
Public debt2025272829
Bilateral official24415
Multilateral1720232622
of which: IMF89993
Commercial01004
Private debt2424202741
Interest payments3835293549
Public debt1111101222
Bilateral (official debt)11115
Multilateral9991116
of which: IMF11000
Commercial11002
Private debt2724202327
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.

Debt service and the stock of debt are calculated on the basis of existing debt, and currently identified disbursements.

Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.

Debt service and the stock of debt are calculated on the basis of existing debt, and currently identified disbursements.

Table 20.Lao P.D.R.: Composition of Net Foreign Income, 2000–2004:(In millions of U.S. dollars; unless otherwise indicated)
20002001200220032004
Receipts7.35.64.73.512.5
Payments to Lao workers by embassies0.60.60.70.70.8
Interest on Bank of Lao P.D.R. reserve assets4.23.91.91.94.2
Interest on commercial banks nostro accounts2.51.12.10.97.5
Income from royalty0.00.00.00.00.0
Payments78.074.069.0116.3113.2
Payments to foreign workers in Lao embassies0.40.40.40.50.5
Income from direct investment in Lao P.D.R.34.636.736.277.758.9
Interest on official borrowing10.010.29.511.922.4
Interest on Bank of Lao P.D.R. foreign liabilities0.60.60.70.00.1
Interest on commercial banks foreign liabilities5.52.02.63.24.5
Interest payable on other private debt26.924.119.523.126.8
Net foreign income-70.6-68.4-64.3-112.8-100.7
(in percent of GDP)-4.1-3.9-3.5-5.3-4.0
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.
Table 21.Lao P.D.R.: Composition of Net Services, 2000–2004:(In millions of U.S. dollars; unless otherwise indicated)
20002001200220032004
Receipts175.6166.0176.3147.5187.0
Transportation19.722.729.821.029.7
Overflight11.314.922.118.021.9
Freight to Lao carriers (exports)2.92.72.62.62.8
International fares to Lao carriers3.73.53.43.23.2
Lao port charges1.81.61.81.61.8
Travel113.9103.8106.884.0119.0
Communications15.713.714.715.616.5
Insurance0.80.31.02.22.6
Embassies (nonsalary)25.525.524.024.719.2
Payments43.143.844.352.155.1
Transportation4.95.45.76.06.5
International fares to foreign carriers4.14.34.54.75.2
Foreign port charges0.81.11.21.21.3
Travel8.18.413.513.514.7
Communications4.35.64.44.45.0
Construction11.915.614.316.516.8
Hydropower0.50.00.00.00.0
Other projects11.415.614.316.516.8
Technical assistance (50 percent of inflow)11.55.62.24.24.9
Lao embassies abroad (nonsalary)2.42.42.43.22.4
Services (net)132.5122.2132.095.4131.9
(in percent of GDP)7.66.97.34.55.3
Memorandum item:
Tourist arrivals (000s)737.2673.8735.7636.4894.8
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.
Table 22.Lao P.D.R.: Domestic and Foreign Investment by Sector, 1999–2003:(In millions of U.S. dollars)
19992000200120022003
Power15103602273
Telecommunication100130
Hotel-Restaurant0012434
Industries-Handicrafts461156423
Service8101213127
Wood Industries02253
Agriculture6681367
Construction1011436
Mining529222
Trading6161011
Bank100000
Garment14051
Consultance00111
Grand Total29638408180337
Source: Data provided by the Lao P.D.R. authorities.
Source: Data provided by the Lao P.D.R. authorities.
Table 23.Lao P.D.R.: Domestic and Foreign Investment by Country, 1999–2003:(In millions of U.S. dollars)
19992000200120022003
Thailand7341481
Lao P.D.R.380902211
USA1150382
Malaysia15402730
France1311916
China43111255115
Vietnam15227366
Korea499155
Norway000022
Taiwan10030
Singapore200136
New Zealand510000
Australia00025
Russia00012
United kingdom40015
Japan23011
Canada00010
Sweden000130
Germany00100
Switzerland02100
Belgium00000
Cambodia01100
India01000
Finland00010
Island00010
Italy10000
Netherlands00000
Denmark00000
Indonesia00000
Austria00000
Myanmar00000
Luxembourg00000
Ukraine00000
Cuba00000
Bangladesh00000
Other00000
Total29638408180337
Source: Data provided by the Lao P.D.R. authorities.
Source: Data provided by the Lao P.D.R. authorities.
1Prepared by Shinichi Nakabayashi (ext. 38918) and Renuka Vongviriyatham (World Bank).
2Banque Pour Le Commerce Exterieur Lao (BCEL) and Lao Development Bank (LDB). Until recently, the Agricultural Promotion Bank (APB), which accepts deposits, has acted primarily as a development bank. However, APB is being transformed into a market-oriented rural finance institution, with support from the Asian Development Bank (AsDB), and the bank has recently been made subject to the same prudential requirements as other commercial banks.
3By 2001, three quarters of BCEL’s loans were non performing and the bank had a capital deficit of 4 percent of GDP. The financial position of the Lane Xang Bank and Lao May Bank, which were merged to form LDB in 2003, was equally poor. Over 60 percent of their loans were non-performing and the banks had a combined capital deficit of 2 percent of GDP.
4The Ministry of Defense conglomerate Phoudoi accounted for 40 percent of the SCBs’ non-performing loans in the late 1990s.
5For example, all mining projects have to bank with the SCBs.
6The program also included a fourth objective: promoting rural and micro finance. The AsDB has actively supported this.
7Although the BOL issued several notices, instructions, and regulations to limit the deterioration of the SCBs’ asset quality during 2001 and 2002, strict limits on loan growth were not enforced until a restricted lending regime came into force in early 2003.
8The bonds are designed to settle arrears between the government, suppliers, and the SCBs.
9International Financial Reporting Standards.
10The decline in profit partly reflected lower interest income due to an increase in non-performing loans, as well as a sharp decline in fee income.
11Under the current regime, SCBs have to frequently seek permission from the BOL to extend credits above a certain amount.

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