Govt outlines plans to tackle debt burden

The government has announced that it will manage and address public debt in various ways as it seeks to ease the country’s financial tensions.
Prime Minister Thongloun Sisoulith told the National Assembly this week the government will no longer accept loans from foreign countries, as one way of tackling the fiscal deficit.
Loans will only be taken out to repay the principal on existing loans when the time arrives for debts to be serviced. 
Deputy Prime Minister and Minister of Finance, Mr Somdy Duangdy, told the Assembly the government will manage public debt in line with the law, while attempting to shrink the fiscal deficit.
The government will also look at other ways to reduce the debt burden, such as converting debt into capital, selling state assets, and selling shares in state enterprises in the hope of sufficiently addressing the country’s liabilities and obligations by the end of this year, he said.
These moves are aimed at enhancing the country’s reputation and building confidence among potential foreign investors and donors.
Concerning the debts owed by the government to private companies that have undertaken and financed state infrastructure development projects, the government will try to mobilise funding from various sources to repay them.
This could be done by issuing government bonds or transferring these debts to commercial banks.
About 180 projects with a total value of 1.86 trillion kip will benefit from the government’s triangle-debt-diversion disbursement initiative, according to Mr Thongloun.
By the end of this year, the government’s debt of 578.35 billion kip will be transferred to commercial banks. This should enable private enterprises to maintain financial liquidity and overcome economic hurdles.
Even though the government has encountered challenges in mobilising funds to repay debts owed to domestic and foreign creditors, it has managed to basically resolve its liabilities.
The Covid-19 pandemic has placed an even greater burden on Laos’ debt service capability. The government has attempted to restructure the repayment of its debts to development partners, as it is the policy of the international community to reduce or partially forgive the amount of debt owed by developing countries.
In addition, the government has drawn up short-, medium- and long-term plans to address its liabilities and obligations by attempting to reduce the fiscal deficit each year.
“At present, we are still able to repay our debts owed to foreign countries,” Mr Thongloun said.
The government did not disclose the total amount owed to private companies and foreign countries.
According to the World Bank’s Lao Economic Monitor published in June, public debt is expected to rise to 65 to 68 percent of GDP in 2020, leaving Laos at high risk of debt distress.
The pandemic has not only hit key economic sectors in Laos including tourism, investment and exports, which are the country’s main sources of foreign currency, but has also affected the economies of Laos’ key trading partners.
The economic slump in these countries is hindering the government’s efforts to mobilise funding from development partners to repay its debts.

By Somsack Pongkhao
(Latest Update October 30, 2020)