Lao Economy

State Employees Lose Monthly Allowance

The government has announced it will suspend the 760,000 kip monthly living allowance paid to state employees this fiscal year but will push forward with previously promised salary increases.

Prime Minister Thongsing Thammavong announced the measure last week at a meeting with leading officials of central-level organisations and Vientiane authorities.

High-ranking officials will also lose the allowance but retired and disabled officials will continue to receive the payment, according to the Finance Ministry.

The allowance cut, which is far bigger than the pledged increase to state salaries, comes amid budget tensions that have seen delayed salary payments to state employees in recent months. At last week’s meeting Mr Thongsing promised payments would be on time from this December, according to the Vientiane Business-Social newspaper. The Finance Ministry said the budget problems were caused by lower-than-targeted tax collection coupled with an enormous 140 percent increase in state allowance and salary payments last fiscal year.

The government began disbursing the 760,000 kip living allowance last fiscal year.

During the 2012-13 fiscal year, which ran from October to September, the government spent almost 3,000 billion kip on allowances paid to state employees.

Initial estimates from the Finance Ministry indicate about 1,000 billion kip could be saved through the allowance cuts.

This fiscal year the government will increase the salary index for state employees from 4,800 kip per index level to 6,700 kip under Prime Ministerial Decree No 221, which pledged salary increases for state employees for three consecutive years.

Prime Minister Thongsing told last week’s meeting the new Prime Ministerial Decree No 241 had been issued, stip+ulating the allowance cuts and salary increase, following approval at last month’s open government meeting. The prime minister said it was necessary to impose the cuts to avoid possible economic crisis and social disorder.

He said the living allowance was not meant to be a permanent payment as most countries introduced such measures for one to three months during times of economic difficulty to enable public servants to adjust to rising living costs.

Mr Thongsing said last month’s meeting agreed there was a need to find a funding source for a living allowance reserve that could help in the event of further cost-of-living rises. He said the country’s financial deterioration has been accelerated by natural disasters, which have struck for three consecutive years with an enormous impact.

Source: Vientiane Times