Lao seeks to raise bank deposits to 84% of GDP
THE GOVERNMENT of Lao has announced its intention to increase deposits in commercial banks to 84 per cent of gross domestic product by 2020, up from the 57 per cent expected in 2016, in a bid to meet growing development needs.
The governor of the Bank of the Lao PDR, Somphao Phaysith, this week presented the next four-year currency plan to the ongoing ordinary session of the National Assembly (NA) following the government’s proposal to revise the four-year national socio-economic development plan (2017-2020).
To achieve this target, it will be necessary to increase deposits to 23,067 billion kip annually, he told the session, which is currently debating the proposal to revise the 2017-2020 socio-economic development plan, the budget plan and the currency plan.
Every effort will be exerted to increase the total credit in commercial banks to 74 per cent of GDP by the end of 2020, an increase on the 50 per cent expected by the end of 2016. To attain this target, an annual increase of 16,817 billion kip must be secured.
The central bank governor pledged to endeavour to increase credit quality, while limiting non-performing loans to not more than 3 per cent of total credit.
“We will work to guarantee the security of the banking system. We will strive to resolve weaknesses in the financial situation and the administration and management of some state and private banks,” he told NA members.
The move is aimed at boosting economic growth, with the government asking the Assembly to lower the average annual growth rate from the previously approved 7.5 per cent to 7.2 per cent over the next four years. Next year, a target will be set to ensure that deposits in commercial banks reach 57 per cent of GDP, an increase of 13,189 billion kip compared to the year before, while bank credit is expected to reach 54 per cent of GDP.
The central bank will endeavour to ensure that the inflation rate is less than the economic growth rate. Under the proposed plan, the economic growth rate for next year will be set at 7 per cent. The kip exchange rate will be allowed to fluctuate between plus or minus 5 per cent against major foreign currencies.
Somphao said the central bank would strive to ensure that foreign reserves could cover the cost of imports for more than five months, and would control money supply growth (M2) so that it did not exceed 24 per cent compared to the previous year.
