Thailand
Laos – World Bank economists: Concrete measures needed to control public debt
The World Bank’s economists have advised the government to take concrete measures to ensure that spending is as effective as possible in order to control public debt, which has risen far above an appropriate level.
This year, public debt reached 70.5 percent of the country’s Gross Domestic Product (GDP), up from the 68.1 percent recorded last year, according to the World Bank.
Based on Laos’ economic circumstances and net present value, the country’s maximum level of public debt should not exceed 40 percent of its GDP, Senior Economist at the World Bank Lao PDR Resident Mission, Mr Somneuk Davading, told Vientiane Times last week.
Public debt has now exceeded the ceiling level – the level which is calculated by the World Bank, he said.
In light of this, Mr Somneuk said the government “needs to ensure the most effective use of money and should not borrow too much further,” as a means to bring debt under control.
The budget deficit in recent years, which forced the government to borrow for its spending needs, has driven the country’s debt to a high level.
The World Bank has named the budget-deficit-ridden debt as one of the risk factors for the Lao economy.
The budget deficit for this year was projected to reach 8,019 billion kip, accounting for 5.7 percent of GDP, according to the Ministry of Planning and Investment.
But Mr Somneuk was optimistic that high-level economic growth would increase the country’s capability to repay more debt in the years to come.
The World Bank has projected that public debt would slightly decrease from 70.5 percent in 2017 to 70.4 percent and 68.5 percent of GDP in 2018 and 2019 respectively as the government has tightened spending and cut unnecessary lavish expenditure.
Minister of Planning and Investment Dr Souphanh Keomixay told a recent government meeting that although public debt had accumulated to a high level, it was not a big concern as measures were being taken to disburse the debt.
He told a meeting of the government cabinet, Vientiane Mayor and provincial governors that thousands of billions of kip had been disbursed to pay debts in recent years, bringing down unpaid debt on completed projects or works to 12,418.16 billion kip. The government is considering repaying the money it owes to private companies by taking over the debts these companies owe to banks after firms took on loans to enable them to carry out state investment projects.
Under this debt disbursement initiative, also known as triangle-debt-diversion disbursement, some 3,000 billion kip would be used to repay the debts owed to approved projects that had been completed.
To repay the remaining debt in the years to come, Dr Souphanh underlined the need for the government to ensure that provinces that had amassed a high level of debt use 40 percent of their allocated budget to pay their debts. The minister also reiterated the need to prioritise the most important projects when it comes to considering and approving new state investment projects, to avoid accumulating unnecessary debt.
Source: http://www.vientianetimes.org.la/FreeContent/FreeConten_World236.html