📋 Tender Overview
Project Name
Enhancing Macroeconomic and Financial Sector Stability, Resilience, and Development
Project Number
58194-001
Country / Economy
Lao People's Democratic Republic
Project Status
Active
Project Type / Modality of Assistance
Technical Assistance
Source of Funding / Amount
TA 10483-LAO: Enhancing Macroeconomic and Financial Sector Stability, Resilience, and Development
Technical Assistance Special Fund US$ 1.50 million
Operational Priorities
OP2: Accelerating progress in gender equality
OP6: Strengthening governance and institutional capacity
Sector / Subsector
Finance / Central banking systems - Finance sector development
Gender
Some gender elements
Description
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.
Project Rationale and Linkage to Country/Regional Strategy
The Lao PDR's total gross domestic product (GDP) at current prices amounts to $14.4 billion, or about $1,937 per capita (with its population of about 7.5 million in 2023). This classifies the land-locked country as lower-middle-income. Industry and service sectors constitute the main drivers of growth. There are three macroeconomic and monetary challenges hampering the country: (i) the country imports more than it exports; (ii) public debt is high and inordinately external; and (iii) gross official reserves are insufficient to fully stabilize the currency. At the same time, local capital markets and the financial sector are weak, forcing external borrowing. Further, the central bank lacks the capacity to manage the circumstances under its mandate.
Regarding macroeconomic and monetary challenges, Lao PDR's export base is narrow. In 2023, ex
