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Friday, July 19, 2024

Lao Government Allocates LAK 4.5 Trillion to Boost Domestic Production and Stimulate Economic Growth

This Week

In a move to increase domestic production and counter ongoing economic challenges, the Bank of Lao PDR (BOL) has allocated LAK 4.5 trillion toward a credit policy to support local businesses.

This financial move aligns with the government’s aim to reduce imports and bolster the production capacities of domestic industries. This would eventually lead to a rise in exports that would help reinstate the country’s depleting foreign exchange reserves, thereby strengthening the Lao Kip and reducing inflation rates.

Under the policy in effect until 2025, the central bank offers loans to commercial banks at a low annual interest rate of 2.5 percent, allowing the latter to charge a maximum interest rate of 6 percent from customers who can apply for loans of up to LAK 5 billion.

Notably, the BOL’s recent decision outlines the annual allocation of LAK 100 billion to Vientiane, Champassak, and Savannakhet provinces, while allotting LAK 80 billion to each of several other provinces.

Businesses engaged in agriculture, forestry, industry, commerce, information, culture, and tourism are eligible beneficiaries who could apply for this loan. Agriculture and forestry businesses would also be encouraged to seek financial assistance for various purposes, including short-term crop cultivation, animal husbandry, and the cultivation of fruit trees and industrial plants like rubber, eucalyptus, and agarwood.

The industry and commerce sector can also apply for monetary support for processing, particularly agricultural products, along with essential items required in construction, packaging, chemicals, and handicrafts. Services and hospitality businesses, including hotels, tourist facilities, road access improvement projects, tour operators, and tourism product providers, could also be potential applicants for this favorable loan scheme.

Additionally, in order to reduce financial pressures on Lao residents, on 22 August, the BOL implemented the government’s credit policy, allocating LAK 2.5 trillion to reduce interest costs on loans secured by businesses from commercial banks, aiming to stimulate economic growth.

In recent months, the government has rolled out several measures to address economic and financial challenges, including the recent issuance of a third tranche of bonds worth LAK 3 trillion. This bond sale, featuring a one-time non-transferable interest rate of 15 percent per year, is part of the government’s comprehensive strategy to confront and ease the nation’s economic woes.

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