Source: Vientiane Times
The government will require 18.7 trillion kip (US$1.8 billion) to address the projected fiscal deficit and repay domestic and overseas loans by the end of this year, a senior official has told parliament.
The surge in financial liabilities has ramped up pressure on the government to seek more money to address the budget shortfall and pay public debts. “Our fiscal deficit is expected to increase from 3.95 trillion kip or 2.17 percent of Gross Domestic Product to 4.62 trillion kip or 2.53 percent of GDP,” Minister of Finance, Mr Bounchom Oubonpaseuth, told the National Assembly recently.
The minister said that more than 14 trillion kip is needed to repay internal and foreign loan principals this year.
The government has formulated a plan to boost domestic revenue, particularly from the mining sector, and to further encourage the private sector to buy shares in state enterprises. In addition, the government will consider reducing expenditure on non-essential projects to ease the burden on its finances.
The Ministry of Finance forecasts that revenue amounting to 26.95 trillion kip will be collected this year, equal to 98 percent of the plan for 2021. However, economists are concerned that if plans to boost national income are unsuccessful, the burden on the government will be even greater.
To address the fiscal deficit and repay loan principals, the government plans to issue bonds worth 3.39 trillion kip for sale in Laos, and bonds for sale in foreign countries worth 9.93 trillion kip. The government will also borrow 3.98 trillion kip for development projects to further boost economic growth and generate job opportunities.
The Covid-19 crisis has severely disrupted business operations, employment and the lives of local people, as well as income generation for the government due to factory closures and businesses failing to make a profit. The government has acknowledged that Laos will continue to face financial difficulties because revenue collection has not increased as anticipated.
Economists say that issuing bonds and borrowing money from other countries could be the only way out, but this approach should only be adopted in emergencies or in the short-term.
The government needs to consider possible long-term sources of revenue to repay its debts, such as capitalising on the benefits offered by the Laos-China railway from trade, investment and tourism.
The finance sector has been called on to plug loopholes that have resulted in the loss of money.
Vice President of the National Assembly, Mr Sommad Pholsena said that tax evasion and the illegal import of fuel are issues that remained unresolved. Assembly members urged the government to strongly regulate currency exchange rates and promote production for export purposes in order to earn more foreign currencies that can be used to address challenges.