Govt intends to address debts owed to companies

The government is committed to repay its debts to private enterprises for the rest of this year to maintain financial liquidity of these companies and to enable them overcome economic hurdles.
The money will be mobilised from various sources, including issuing bonds and shifting the government’s debts owed to private companies to commercial banks.
The move is part of the government’s efforts to help local companies minimise the impact of the Covid-19 crisis despite the country’s rising budgetary tensions.
The cabinet’s monthly meeting chaired by the Prime Minister, Thongloun Sisoulith, on Friday highlighted the government’s intention to address this issue while pushing for constant development of mega projects to boost economic growth.
From the beginning of 2018 to the beginning of 2019, more than 3,000 billion kip of the government’s debts incurred to private enterprises were shifted to commercial banks.
The President of the Lao Furniture Association, Mr Khamphay Somsana, told Vientiane Times yesterday that most businesses support this initiative as they would not be able to repay bank loans.
He said he has benefited from the government’s triangle-debt-diversion disbursement initiative in previous years and was waiting this year for this initiative to commence.
As of last year, 2,091 state-funded projects had been completed, but the cost of construction amounting to 10.14 trillion kip remained unpaid. The debt could be rising as many infrastructure projects carried out by construction companies have been completed.
Nevertheless, there is no official report about the exact amount of the government’s debts owed to private enterprises this year as the government is inspecting the implementation of completed state investment projects to identify whether those projects were overvalued and implemented based on laws.
The government told the National Assembly in June that it would scrutinise more than 4,600 projects with a total value of 103,187 billion kip, of which 672 projects had already been inspected. The government has saved about 1.2 trillion from overvalued projects as a result of its inspection activities.
Every year, the government will allocate some of its investment budget to repay debts for companies so that they can continue their operations.
Since the amassment of national revenue is projected to reach only 78 percent of the annual plan in 2020, it was necessary to cut spending on unessential projects.
The government will not only intend to cut spending on administrative affairs but also postpone state investment budget by 50 percent to the next fiscal year to minimise the country’s budgetary tension.New loans will be restricted for projects which will not result in economic return. Nevertheless it’s critical to modernise revenue collection mechanisms in order to minimise financial leaks. This year the Lao economy is projected to grow at the rate of only 3.3-3.6 percent, down from 6.5 percent as the government’s fiscal deficit and debt burden have been exacerbated by the coronavirus pandemic, impacting national development and the livelihoods of local people.

By Somsack Pongkhao
(Latest Update August 25, 2020)