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Laos: Govt borrows more money to address deficit
The government needs 2,420 billion kip to respond to budget expenditure that occurred in the first quarter of this year (January to March), a government leader has said.
Of this figure, 957.7 billion kip is owed from the budget deficit in Q1 and the rest constitutes the government’s obligations in paying off loans and bonds.
Deputy Prime Minister and Minister of Finance MrSomdyDuangdy told the ongoing National Assembly session recently that the government would have to source more funding from loans and bonds to deal with the deficit and maintain financial liquidity.
He said the finance ministry had sourced 2,442 billion kip to pay off the deficit incurred in Q1. Of this, 592 billion kip was sourced from loans to fund development projects and the rest was mobilised from domestic sources.
This means the government still has a 22 billion kip surplus to spend in the second quarter.
Critics say borrowing more money to address the deficit is feasible in the short-term, but in the longer term the deficit could drag the country into rising chronic debt and economic crisis.
In the long run the government needs a strategy to manage the deficit and ensure the country’s debts are under control.
In addition, the government plans to borrow 543 billion kip to use as a share in the Laos-China railway project, which has been approved by the National Assembly.
The government also plans to borrow money from overseas sources to fund 12 mega projects valued at US$1.36 billion. However, only US$150 million will be borrowed to finance projects in 2017.
Economists say budget deficits are common in least developed countries like Laos, especially given that the landlocked Asian nation requires huge capital and investment funding to sustain economic growth of 7-7.5 percent over the next five years. But it is critical to ensure that unauthorised development projects don’t get off the ground as this will make it difficult for the government to control the country’s debts.
The government has been further challenged by an increase in revenue collection of just 1.57 percent year-on-year in the first quarter of 2017. This compares to an increase in expenditure of 24.9 percent in Q1.
Revenue collection has not met the planned targets in some sectors and the re-inspection of revenue sources has not been completed, which is a further obstacle to the government’s attempts to meet goals.
Economists say the government must work harder to plug loopholes in revenue collection and mete out stiff penalties to officials who violate the laws.
Laos has experienced a revenue shortfall over the past four or five years, partly linked to falling prices of mineral commodities and to financial leaks.
Laos is classified as a least developed country and has a GDP of 108.709 trillion kip (US$13.27 billion), recording economic growth of 6.9 percent last year.
Source: http://www.vientianetimes.org.la/FreeContent/FreeConten_Govt.html