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Inflation, exchange rates, M2 targets ‘a great challenge’, PM says

Dragging inflation down to the targeted 9 percent by next year from the current rate of almost 30 percent will be a huge challenge, Prime Minister Sonexay Siphandone told the National Assembly (NA) on Monday.
In the drafts of the 2024 socio-economic development, monetary and fiscal plans presented to the NA’s ongoing 6th ordinary session, the government states an inflation rate target of 9 percent.

Prime Minister Sonexay Siphandone.

The government had hoped to reduce inflation to 9 percent by the end of this year, but its attempts failed, so it has set the same target for 2024.
Although inflation dropped from 40 percent in mid-2022 to 25.69 percent in September this year, achieving the 9 percent target in 2024 will still be a challenge, the PM told National Assembly members.
He was responding to questions raised by the lawmakers about whether the targets set for next year and the remaining two-and-a-half years of the second half of the five-year national socio-economic development plan for 2021-2025 could be achieved.
Through next year until the end of 2025, the PM added, it is projected that the regional, global and domestic environment will continue to change in ways that are hard to predict.
This complexity “coupled with the accumulated economic and financial difficulties Laos has suffered for years will make efforts striving for 2024 targets a great risk and challenge,” PM Sonexay said.
The head of government named inflation, exchange rates, and money growth (M2) targets as the greatest challenges. In the draft of the 2024 monetary plan, the government said it will strive to control currency exchange rates so they do not put pressure on inflation.
The cabinet will also strive to ensure that M2 does not exceed 25 percent compared to 2023.
As of September 2023, M2 hit 31.49 percent compared to the same period last year. M2 is projected to fall to 28.54 percent by the end of this year compared to the year before, which would exceed the approved plan of 26 percent.     
In the social sphere, targets to increase enrollment rates in the formal education system also remain a great challenge, with schools recording a steady decline in attendance. Enrollment in vocational schools and universities is also decreasing.  
In addition, targets concerning healthcare security coverage, drug control, and the issuing of land titles are also very ambitious, the PM said.
Recognising these challenges, he added, the government has described the 2024 socio-economic development plan as very ambitious, with the focus on addressing ongoing financial and economic difficulties including inflation, fluctuating exchange rates, rising costs, and debt servicing.
Economic growth is projected at 4.5 percent next year, an increase from the 4.2 percent projected in 2023.
Other key targets set in the draft 2024 socio-economic development plan include:
- Total revenue of 49,737 billion kip, accounting for 16.93 percent of GDP, up 29 percent from the 2023 target,
- Total expenditure of 58,294 billion kip, accounting for 19.84 percent of GDP,
- Foreign reserves to cover import costs for at least five months,
- Non-performing loans of commercial banks not to exceed 3 percent of total credit issued,
- Export earnings paid through the banking system to reach at least 60 percent of the total export value,
- Export value to exceed US$8.7 billion, up by 6.07 percent compared to 2023,
- Import value to exceed US$7.2 billion, up by 2.62 percent compared to 2023,
- Total investment to reach 56,534 billion kip (19.24 percent of GDP), including 32,435 billion kip from local and foreign private sectors.  

By Souksakhone Vaenkeo
 (Latest Update November 8, 2023)

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