(KPL) The Bank of the Lao PDR (BOL) has agreed to reduce the base interest rate for the kip currency for the 7-day term by 0.5 percentage points, from 8.5% per annum to 8% per annum, following the 1st Monetary Policy Committee Meeting for 2026.

The meeting, chaired by Governor Ms. Bounkham Vorachit, reviewed the implementation of the 4th Monetary Policy Committee Resolution for 2025, assessed the performance of monetary policy instruments, and discussed future policy directions. Reports on foreign exchange management, external debt, commodity prices, international trade policy, and export promotion were also presented.

The committee noted continued uncertainty in the global environment, including geopolitical developments and economic shifts among major powers, which have contributed to volatility in fuel, energy, gold, and food prices and are expected to slow global economic growth. With inflation in major economies projected to move toward target levels, policy rate reductions are anticipated in 2026.

Domestically, challenges persist, including a fragile economic foundation, strong demand for foreign currency to service external debt, exchange rate fluctuations, and credit growth that has yet to align with structural economic goals. However, coordinated policy implementation across sectors is expected to help maintain inflation at around 5%.

To support monetary stability, the committee also endorsed macro-monetary management directions for 2026, including a managed float exchange rate mechanism and continued refinement of policy tools such as interest rates, reserve requirements, and the issuance of short-term BOL bonds, alongside regular monitoring of exchange rate movements to contain inflation risks.

KPL