BOL Governor Mrs Bounkham Vorachit chairs a meeting of the central bank last week.

BOL lowers benchmark interest rate, sets policy direction for 2026

The Bank of the Lao PDR (BOL) has lowered its 7-day benchmark interest rate by 0.5 percentage points, from 9 percent to 8.5 percent per annum, in a move aimed at maintaining appropriate monetary conditions amid continued pressures on the domestic economy.
The decision was endorsed at the 4th meeting of the Bank’s Monetary Policy Committee on November 20.
The session was chaired by BOL Governor Mrs Bounkham Vorachit and brought together the Vice Chairman, Committee members, the Board of Governors, senior officials, and representatives of relevant departments to review progress made in implementing the resolutions adopted by the Committee’s 3rd session, along with the performance of monetary policy instruments throughout the year.
Participants also considered reports on fiscal policy operations, external debt management, and the orientation of macroeconomic management in 2026.
The Committee noted that the economy continued to face a complex set of internal and external risks over the first 10 months of 2025.
These challenges include the expected slowdown of global economic growth, policy rate adjustments by regional and international central banks, ongoing exchange rate volatility, and the persistently high demand for foreign currency to meet external debt obligations.
Structural vulnerabilities within the domestic economy remain, while liquidity conditions in the commercial banking system and credit supply still do not sufficiently support productive sectors. Credit growth is showing signs of further deceleration.
Despite these headwinds, inflation is projected to remain subdued in the final quarter of the year, with the annual rate expected to average around 5 percent.
In response to current economic conditions, the Committee approved several measures to safeguard monetary and financial stability.
Beyond adjusting the benchmark rate, members endorsed the orientation and operational plan for monetary policy in 2026, reaffirming the bank’s continued implementation of a mixed monetary policy.
This includes further refinement of policy instruments such as the benchmark interest rate and required reserve ratio, and the issuance of short-term BOL bonds in line with prevailing economic conditions.
The bank will continue to pursue an exchange rate policy based on a managed market mechanism, maintaining the commercial banks’ trading band at ±6.5 percent while allowing greater flexibility in the daily reference rate to uphold the value of the kip and mitigate inflationary pressures.
Exchange rate movements will be closely monitored to ensure timely intervention if necessary.
To strengthen policy implementation and oversight, the Committee approved the scheduling of four meetings in 2026, during which relevant sectors will be required to report on progress in commodity price control measures, tax and customs duty exemptions, and efforts to curb informal or underground trading that results in lost state revenue.
The meeting also reaffirmed the policy to centralise government deposit accounts, instructing technical departments of the BOL and the Ministry of Finance to enhance coordination, particularly by advancing the Next-Day Transfer (T+1) mechanism to ensure timely movement of public funds and avoid delays in representative commercial banks.
Furthermore, the BOL will continue to work closely with fiscal authorities to coordinate monetary-fiscal operations and commodity price management, maintaining up-to-date assessments of the situation to ensure that all policy measures remain aligned and responsive.
The half-day session concluded with constructive discussions and consensus on measures needed to strengthen macroeconomic stability and support the nation’s development priorities in the year ahead.

By Times Reporters
(Latest Update November 26, 2025)