Banking & Finance

Central Bank Governor gets New Legal Backing

Date: 16 September 2018; Type: Legal News; Source: Vientiane Times

The Governor of the Bank of the Lao PDR has gained legal backing to chair the central bank’s top policy and decision-making body. President Bounnhang Vorachit on August 3 promulgated the newly-amended Law on the Bank of the Lao PDR, giving legal back-up to the central bank’s governor to chair its top body. In the past, the chair of the bank’s board of directors was one of the deputy prime ministers, usually the one in charge of economic affairs. Deputy Prime Minister and Minister of Finance, Mr Somdy Duangdy, was appointed to chair the bank’s board of directors.

A source at the Bank of the Lao PDR told Vientiane Times last week that a new chairman of the board and board members will be appointed soon, in keeping with the spirit of the newly-amended law.

When asked about key changes in the law, he said that in addition to the new guidelines on the composition of the top decision-making body, the role of the central bank and its responsibilities had been strengthened to ensure it was in a position to supervise the operations of the bank and introduce more monetary policies and financial transactions.

The Bank of the Lao PDR witnessed a leadership change this month. The government appointed Mr Sonexay Sithphaxay as the acting governor of the central bank, while its former chief was transferred to the position of Minister to the Prime Minister’s Office.

It is not known whether Mr Sonexay will serve as the chairman of the bank’s board of directors since he now serves as the bank’s acting governor. The law states that only the governor can be the chairperson of the top decision-making body.

The bank’s acting governor is expected to face a number of challenges. He will have to address inflation growth and narrow the discrepancy between the official currency exchange rate and the market rate. He also has to ensure that people have access to affordable bank loans so they can invest more and create jobs in line with the government’s policies.

Analysis shows that the government’s decision to allow the governor of the central bank to chair its top decision-making body would empower the top administrator, and that the governor would be in a position to have the final say in its main policies.

In addition, delivery of the central bank’s services would be more professional as the governor would be able to use his expertise in carrying out his duties.

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