General & Misc

Government seeks to minimize Budget Burdens and Debt Distress

Date: 10 July 2019; Type: Legal News; Source: Vientiane Times

The government has outlined measures to boost national revenue for 2020 while ensuring the effectiveness of state investment projects.

The Prime Ministerial Order recently instructed the relevant sectors to tighten budget expenditure by trimming their administrative budgets, with non-essential development projects to be postponed.

State sectors have been told to consider reducing the number of their employees as well as to take on fewer new officials.

The government said some state organisations would be encouraged to embrace financial self-sufficiency. These included educational institutions, hospitals, and media organisations.

The move aims to constrain budget spending and the fiscal deficit, preventing Laos from being dragged into chronic debt distress and financial crisis.

The order, signed by Prime Minister Thongloun Sisoulith, emphasised that the government would not approve new spending proposals that are unlikely to result in direct economic returns, such as the purchase of new vehicles and construction of public office buildings.

Only strategically essential projects relating to rural development, poverty reduction and disaster recovery will be allowed to proceed.

New state investment projects to be approved also need to be associated with the promotion of industrial productivity, market distribution, the attraction of foreign investment, and job creation.

State sectors have been told to allocate funding to priority development projects that will lead to high economic returns.

Disbursement of the state budget must be carried out through transparent bidding to ensure the effective use of state finances and administration.

The government vowed to take into account the repayment of the nation’s debts, notably the money owed to private enterprises to sustain the financial liquidity of the private sector, enabling businesses to expand and further generate jobs for local people.

Also, the government will promote public-private partnerships for the construction of infrastructure, in a bid to ensure economic growth remains at a minimum of 6.5 percent annually. Another priority for the government is to regularly pay the salaries and allowances of state officials.

Government sectors need to bear in mind the capacity of their divisions to source revenue when drawing up their budgets, to limit the fiscal deficit and prevent the country’s debts from rising further.

The government also told the relevant sectors to not only seek other possible sources of income but also emphasised the importance of revenue collection through bank accounts and other electronic platforms.

In 2019, the government plans to collect 26.3 trillion kip in revenue, of which domestic revenue is expected to reach 24.24 trillion kip.

Expenditure is set at 33.39 trillion kip, with the projected budget deficit at 7.08 trillion kip, equal to 4.28 percent of Gross Domestic Product (GDP).

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