Govt to borrow US$263 million to address budget deficit

Govt to borrow US$263 million to address budget deficit

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By Ekaphone Phouthonesy (Latest Update December 24, 2013)

The Lao government plans to borrow 2,105 billion kip (US$263 million) from local and international sources to address the budget deficit this fiscal year, according to a prime ministerial decree.

The decree on the implementation of the 2013/2014 socio-economic development plan shows that the government expects to borrow 1,804 billion kip (US$225.5 million) from international sources.

It will also sell 300 billion kip (US$37.5 million) worth of bonds to local and international investors so as they can use the money to address the budget deficit.

The Lao government plans to collect 15,726 billion kip (US$1.9 billion) in revenue this fiscal year to meet the growing demands of state expenditure, according to a prime ministerial decree.

The decree on the implementation of the 2013/2014 socio-economic development plan shows that 73.22 percent of the revenue will come from domestic sources including business taxes, import-export tariffs, land taxes, income from state enterprises and the sale of timbers.

The rest of the revenue will come from official development assistance (ODA) provided by development partners including Japan.

In the 2013/2014 fiscal year, the Lao government plans to spend 17,831 million kip (US$2.2 billion), which will force the government to borrow 2,105 billion kip (US$263 million) so as it will be able to secure funds for all planned expenditure projects.

The largest area of expenditure will be state investment, which will account for 44 percent of the state budget. Salaries for state employees will be the second largest area of expenditure, accounting for 19.33 percent of total expenditure.

Some 13 percent of total state expenditure will be allocated towards the payment of debt and 9 percent of the budget will be used for administrative purpose s.

Economists have cautioned that the budget deficit level is high. However, it is still within the acceptable range therefore it should not cause any significant impacts to the macro economy.

They also said that the country has a number of investment projects which will generate enough funds for the country to address the budget deficit in the longer tern.

The international community continues to provide financial and technical assistance to Laos despite the fact that it is facing economic difficulties.

Laos received US$777 million in financial and technical assistance from development partners in the 2012/2013 fiscal year, about 0.27 percent in excess of the annual target.

About 72 percent of the funds are in the form of grants while the rest are low interest loans. The Lao government has invested the money on some 883 development projects nationwide.

Most of the development projects aim to help Laos to achieve the millennium development goals, reduce poverty and escape least developed country status.

By Ekaphone Phouthonesy (Latest Update December 24, 2013)

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