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Govt struggles to address budget deficit

The government has projected that the country’s budget deficit for the first six months of this year could increase to as much as 1.16 trillion kip, intensifying budgetary tension against the backdrop of continuing revenue shortfalls.
 If the money to pay the principal amount owed to domestic and foreign creditors is included, Laos will require a total of 5.87 trillion kip to cover its expenditure needs in this period.  
Speaking during the National Assembly’s ongoing session recently, Prime Minister Thongloun Sisoulith announced the government’s plans to address the deficit by mobilising more funding from domestic and foreign sources.
The government highlighted measures to boost revenue collection and achieve the goal approved by the National Assembly to minimise the administration’s financial difficulties.
Financial officials said the government will concentrate on mobilising funds from domestic sources, including bonds issued by the Bank of Lao PDR and funding raised through the Lao Securities Exchange. 
The government hopes to mobilise more than 6.85 trillion kip in the first six months of this year to sustain economic growth despite the country’s rising debt distress. 
On Monday, National Assembly members debated an amendment to the law related to tax management at the ongoing session. NA members provided inputs on how to create incentives to attract more companies to register with the Lao Securities Exchange so that the government can mobilise more funds for development needs.
In 2019, the government plans to collect 26.3 trillion kip in revenues, of which domestic revenues are expected to touch 24.24 trillion kip.
 Expenditure has been set at 33.39 trillion kip, with the budget deficit being projected at 7.08 trillion kip, equal to 4.28 percent of the Gross Domestic Product (GDP).
However, revenue collection over the past four months amounted to only 6.32 trillion kip, equal to 24 percent of the annual plan.
More than 6.66 trillion kip has been disbursed, equal to 19.9 percent of the annual plan for budget expenditure, with the budget deficit at 347 billion kip.
Deputy Prime Minister Somdy Duangdy told the National Assembly last week that the government will limit the budget deficit next year as part of efforts to contain debts.
The government has acknowledged that Laos will continue to face financial difficulties since revenue collection has not increased as anticipated, while budgetary expenditure has risen significantly over last decade.
Economists have said issuing bonds and borrowing money from other countries could be the only way out, but this approach should only be adopted in emergencies or for the short-term.
The government needs to consider possible long-term sources of funding to repay debts and to prevent Laos from being dragged into an economic crisis.

By Somsack Pongkhao
(Latest Update June 19, 2019)

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