Lao Economy

Govt Warned To Manage Growing Debt

Source: Vientiane Times

Economists have warned the government needs a long-term strategy for managing its burgeoning debt against obligations while it works on securing more efficient and additional revenue sources.

At the moment, Laos requires 1,559 billion kip to meet its budget expenditure following revenue shortfall in the first quarter of this year.

Deputy Minister of Finance Mr Asaphangthong Siphandone told media recently the government is sourcing 2,442 billion kip to address the deficit that occurred in the first quarter.

Of the total figure, 592.34 billion kip is being sourced from loans; 850 billion from bonds issued by the Ministry of Finance and 1,000 billion kip from bonds issued by the Bank of the Lao PDR.

If these measures succeed, the government will have 850 billion kip in surplus which can be spent in the se cond quarter of the year.

A senior economist from the National Economic Research Institute, Dr Leeber Leebouapao told Vientiane Times last week that issuing bonds and borrowing money from other countries are the only way out, but this approach should only be done in an emergency or the short term.

“The government needs to consider possible sources in a long-term strategy to repay the debts to prevent the country from being dragged into economic crisis,” he said.

“One of the most important things is to review our mechanisms and strategies to boost revenue collection while ensuring the efficiency of budget expenditure.”

In the first quarter of this year (from January to March), the revenue collection attained 4,621 billion kip, equal to 77.8 percent of the quarter’s plan or 19.3 percent of the yearly plan.

Nevertheless, budget expenditure was disbursed at 5,579 billion kip, equal to 75.69 percent of the quarterly plan or 17.2 percent of the annual plan.

This means the budget deficit in the first quarter amounted to 957.73 billion kip. However, the government still requires huge amounts of its budget for necessary projects along with 1,269 billion kip to repay debt owed to foreign loans and 193 billion kip to repay bonds.

For the whole of 2017, the government plans to collect 23,801 billion kip in revenue with expenditure set at 32,262 billion kip. This means the budget deficit is set at 8,461 billion kip, equal to 6.52 percent of GDP.

The revenue shortfall in the first quarter means more work needs to be done in order to collect revenue as planned by yearend.

As of October 2015, 20 central state organisations, four provinces and the capital of Vientiane accumulated debts totalling 29,107 billion kip.

This figure was unveiled during a meeting held between the government cabinet members, Vientiane mayor and provincial governors in the capital in 2015.

However, it still remains unclear how many state organisations in total actually owe debts as there has been no official update about the country’s debt since that time.