BOL targets 24 percent annual increase in deposits, despite rate cut
BOL targets 24 percent annual increase in deposits, despite rate cut
The Bank of the Lao PDR (BOL) expects to increase the number of deposits by 24 percent a year from 2016 to 2020 to maintain economic growth, despite cutting the interest rate.
BOL Governor Dr Somphao Phaysith reported on the central bank's plan to maintain monetary stability in support of socio-economic development at the recent 10th Party Congress in Vientiane.
Dr Somphao said the planned increase in deposits would result in a 24 percent increase each year over the next five years, accounting for 84 percent of Gross Domestic Product (GDP).
Over the past five years, the Lao economy has grown by 7.9 percent each year, with GDP in the fiscal year 2014-15 reaching about 102.320 trillion kip (US$12.8 billion). GDP per capita reached 15.8 million kip (US$1,930). But in five years time, GDP per capita will be US$3,190.
Although the central bank reduced the interest rate on kip deposits from 9.5 percent per 12 months from September 2015 to 6.13 percent this year, the rate can be adjusted each year according to funding needs.
BOLVice Governor Mr Sonexay Sithphaxay told Vientiane Times yesterday that the planned increase in deposits was expected to meet the target because deposits at commercial banks will continue to increase and the economy is expected to expand significantly in the future.
Some people have withdrawn their money from banks since the interest rate was cut, with the intention of investing it elsewhere.
Mr Sonexay said that was certainly an option for depositors, and still benefited the economy and society because the money that was withdrawn could be ploughed into investment, production and services.
However, banks must devise measures to steadily improve their services.
Acting General Managing Director of Banque pour le Commerce Exterieur Lao Public (BCEL), Mr Phoukhong Chanthachack, said deposits would achieve the target set in BOL's plan because the interest rate could be adjusted so that people would continue to deposit their money in banks.
BCEL is a leading commercial bank in Laos and has seen a surge in the number of deposits made.
Mr Phoukhong said the number of deposits at BCEL had risen by 8 percent in 2015 compared to 2014, exceeding the target by 4 percent.
