Enhancing Macroeconomic and Financial Sector Stability, Resilience, and Development

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The technical assistance (TA) will support the Bank of the Lao People's Democratic Republic (BOL) in improving the country's debt sustainability and macroeconomic stability. It will strengthen the central bank financial sector framework and related policies, as well as its regulatory, supervisory, analytical, and monitoring capacities. Since the early 2010s, economic structural challenges have undermined economic growth prospects in the Lao People's Democratic Republic (PDR) by causing long-standing current account deficits, draining foreign exchange reserves, depreciating the Laotian kip, and raising inflation. Behind these macroeconomic challenges are excessive government borrowing and repayment obligations to finance increasing external public sector debts, at least in part. These have been on the rise as the relatively underdeveloped local capital markets have forced the government to fund its needs using external sources. The TA will, therefore, aim to enhance BOL's capacity to develop its domestic financial sector, which can improve the mobilization of domestic resources and reduce reliance on external borrowing. Guiding this strategy is the Asian Development Bank (ADB) country partnership strategy for the Lao PDR, 20242028. The TA will also support ADB's broader financial sector business development efforts and related activities in Lao PDR through 2028.