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Official aid to increase despite fear of cuts

Official Development Assistance (ODA) to be provided to Laos in 2018 is expected to increase from this year amid concerns about cuts in aid when Laos graduates from Least Developed Country (LDC) status.

According to commitments given by ODA providers, Laos is expected to receive 9,062 billion kip, up by 433 billion kip compared to 2017's expected target, Minister of Planning and Investment Dr Souphanh Keomixay told a government meeting last week.

The committed ODA comprises 21.5 percent of total investment, which will also be sourced from the general state budget, domestic and foreign private investment, and bank credit.

ODA ranks as the second largest contributor to total investment after domestic and foreign private investment.

It amounts to 19,720 billion kip or 46.8 percent of total investment of 42,145 billion kip, according to the drafted socio-economic development plan for 2018 presented by the minister.

Bank credit contributes 8,763 billion kip or 20.8 percent and the general state budget is responsible for the remainder, the minister told the two-day meeting between government cabinet members, the Vientiane mayor and provincial governors.

The expected increase in ODA, which comprises grants and low-interest loans, comes amid concerns that aid to Laos could be cut, especially after 2020 when Laos expects to graduate from the UN's list of least developed countries.

But Deputy Minister of Planning and Investment Dr Kikeo Chanthabouly told National Assembly members at a recent meeting that Laos is unlikely to face aid cuts after leaving the LDC grouping.

Although aid in the form of grants could be cut, financial assistance in the form of low-interest loans is likely to increase.

Dr Kikeo explained that a country with LDC status, which has limited financial capability to repay debt, has insufficient credit to request more loans so only grants of a limited amount would be provided.

On the other hand, leaving LDC status means th at a country has more credit and so can request more loans.

“What is likely to decrease is the number of grants. But low interest loans will increase,” Dr Kikeo said.

In the 2015-16 fiscal year, Laos received more than 6,462 billion kip in ODA, some 13 percent above the target for the year. Of the total ODA, almost 2,000 billion kip was given as grants and the rest as loans, according to a previous government report.

Over the first six months of this year, Laos received more than 3,485 billion kip (US$419.3 million) in ODA representing 40.76 percent of the target for 2017. Of this, more than 953.3 billion kip (US$114.7 million) was given as grants and the rest as loans.

By Souksakhone Vaenkeo
(Latest Update September 14, 2017)

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