Bank of the Lao cuts 7-day kip base rate to 8% and endorses 2026 monetary and exchange rate policy direction

The Bank of the Lao’s Monetary Policy Committee held its first meeting of 2026, reviewed implementation of decisions from its fourth meeting of 2025, and approved a 0.5 percentage point cut in the Bank of the Lao’s 7-day kip base interest rate to 8% per year from 8.5%. It also endorsed the operating direction and measures for monetary policy going forward, alongside related actions on foreign exchange management and economic support. Inflation was expected to remain around 5% amid heightened external uncertainty and domestic constraints, including high foreign currency demand for external debt servicing and exchange rate volatility. The agreed 2026 approach includes a coordinated monetary and exchange rate policy using a managed market mechanism, with further review and refinement of tools such as policy interest rates, the compulsory reserve ratio, and issuance and sale of short-term Bank of the Lao bills, alongside tighter monitoring of exchange rate movements to limit inflation impacts. Supporting measures cover strengthening management of foreign currency inflows and outflows from trade and investment, improving the foreign exchange cash-flow management system (CMS), continuing work on the Treasury Single Account (TSA) including next-day transfers of government funds to the Bank of the Lao (T+1), pursuing credit measures to stimulate the economy, and advancing commodity price management work including study of a commodity auction market and pricing structures for essential goods. The CMS is expected to begin operation in March 2026, and the Bank of the Lao will continue coordination and regular information-sharing with relevant ministries and agencies.