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Bank of the Lao PDR curbs lending to real estate projects: ADB
The Bank of the Lao PDR has taken steps to limit lending for real estate development, in a bid to rein in inflation.
According to the Asian Development Outlook published by the Asian Development Bank (ADB), Lao credit growth has moderated from very high rates in recent years to 34.2 percent in December 2011. However, the lending rate is still considered very high.
The deceleration of credit growth stems from reduced direct lending by the central bank for infrastructure projects and steps the bank took to curb lending for real estate speculation, the ADB says.
Central bank officials were not available to comment on the issue yesterday but had earlier told Vientiane Times the Bank of the Lao PDR would introduce measures to curb lending to real estate development projects if it found the rate of lending was too high and was causing higher inflation.
Property construction in Laos has boomed over the past five years. More people are investing in real estate amid hopes that growing development will result in a higher demand for accommodation due to the increasing number of tourists and foreign residents.
Economists have warned that the high rate of lending for real estate development will drive up inflation, as this sector does not produce consumer goods. Data show that the price of food and construction materials has increased rapidly due to growing demand.
The ADB publication also notes that a shortage of longer-term bank deposits has constrained commercial bank lending to the private sector.
The central bank has maintained its policy of keeping the kip broadly stable against the US dollar and Thai baht. In 2011 the kip appreciated by 2.7 percent against the US dollar and by 1.6 percent against the baht.
Dollarisation has gradually declined from 79 percent in 1999 to about 45 percent last year thanks to the increasing value of the kip, which helps to create confidence among Lao people about opening kip bank accounts.
The declining use of foreign currencies in Laos is one of the major achievements of the central bank. The bank has run a number of campaigns to encourage Lao people to use the national currency, seen as fundamental to the bank being able to keep the kip stable.
According to the ADB, accounting for foreign direct investment and other capital inflow, gross international reserves fell to US$679 million in 2011, which can secure the import of non-resource goods for about 2.5 months.
vientiane times
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