Since the introduction of the New Economic Mechanism in 1986, the Lao PDR has been gradually moving from a centrally-planned economy toward a market-oriented system. It has planned a wide range of reforms, assisted by various supranational bodies such as the World Bank, Asian Development Bank (ADB), International Monetary Fund (IMF), and the European Union.

Financial sector reforms are one of the country's priority initiatives, with banking sector reforms the Government's current focus. These reforms involve strengthening the operation and oversight functions of the Bank of the Lao PDR (BOL), and restructuring state commercial banks by improving their lending decisions and risk management systems.

A number of legislative reforms to support financial sector development have been passed, including the Decree Law on Foreign Currency and Decree Law on Commercial Banks.

The Sixth Five-Year National Socio-Economic Development Plan covers the period 2006–2010. It outlines the plans and strategies to achieve the targets set in the Ten Year Socio-Economic Development Strategy. This sixth five-year plan focuses on the following areas:

• promoting economic development;
• increasing competitiveness and utilizing comparative advantages; and
• strengthening the positive linkages between economic growth and social development.