The Bank of Laos has cut its base interest rate by 0.5 percentage points in an effort to ease financial burdens on households and businesses while supporting economic recovery amid both domestic and global headwinds, according to The Laotian Times. 

The decision was taken at a Monetary Policy Committee meeting on August 15, chaired by Governor Bounkham Vorachith. Officials reviewed recent developments and concluded that a modest reduction would help stimulate growth and maintain financial stability.

Economic indicators suggest some signs of improvement. Inflation averaged 10.18% between January and July 2025, while the July figure dropped to 5.3%, down from 8.3% in May. The Lao kip, however, weakened slightly, losing 0.11% against the US dollar and 1.19% against the Thai baht. The gap between official commercial bank exchange rates and market rates also widened.

Despite these challenges, banking activity has remained resilient. The broad money supply (M2) grew by 11.92% year-on-year, while foreign reserves are sufficient to cover approximately 4.9 months of imports, helping to underpin the stability of the currency.

Nonetheless, the economy continues to face significant constraints. Heavy reliance on imports, external debt pressures, and volatility in global commodity markets such as oil and gold pose risks to macroeconomic stability. Policy shifts in major economies also add to external uncertainties.

In response, the committee lowered the base interest rate from 9.5% to 9% per year. The Bank of Laos affirmed it would continue to operate under a market-based exchange rate mechanism, keeping the reference rate at 6.5. It will also prioritise stronger foreign exchange management, centralisation of government deposits, upgrades to payment infrastructure and tighter debt controls.

As part of a broader stimulus strategy, the central bank aims to make credit more accessible for enterprises and explore fresh lending approaches to encourage investment and growth.