Lao Economy

Grants From Overseas Plummet By Half

Source: Vientiane Times

Grants provided to Laos by foreign countries in the first quarter of 2017 dropped by more than half compared to the same period last fiscal year, the government has told parliament.

Laos received just over 438 billion kip in grants over the first three months of this year, a drop of 57.06 percent compared to the same period last fiscal year, Deputy Prime Minister and Minister of Finance Somdy Duangdy told the ongoing Ordinary Session of the National Assembly (NA) recently.

Grants provided in the first quarter represented only 78.87 percent of the amount expected and amounted to just 17.68 percent of the annual target.

Minister of Planning and Investment Dr Souphanh Keomixay told the NA that the Official Development Assistance (ODA), which comprises both loans and grants, received by Laos in the first quarter had reached only 903 billion kip (US$110 million). This represented just 10.4 percent of the annual plan.

Prime Minister Thongloun Sisoulith said previously that foreign aid provided to Laos was likely to decline now that Laos was enjoying greater development, so donors were moving their assistance to other, poorer countries.

“We shouldn’t expect much [from the assistance]. We should try to be self-sufficient,” Mr Thongloun told a meeting in Vientiane when giving instructions on the implementation of the 2017 socio-economic development plan.

The decline in foreign aid comes as Laos approaches the 2020 deadline for graduation from Least Developed Country status.

An official from the Ministry of Planning and Investment in charge of ODA said it was a common trend globally that foreign aid provided to a country decreases when that country achieves a certain level of development and self-reliance.

However, the official, who asked not to be named, said that even if foreign grants declined this did not mean Laos would suffer financially because the country could expect to obtain more loans.

The official explained that growing development means a country has a growing capacity to repay debt, so it could expect to secure more loans. But the interest rate on the loans could be higher compared to loans provided under the ODA scheme.

In 2016, Laos received more than 5,053 billion kip in ODA, representing 90.8 percent of the plan for that year. Despite the expected decline in foreign aid, in 2017 the government anticipates it will receive more ODA worth 8,629 billion kip, which represents 23.73 percent of the total expenditure planned for 2017.