Post by Admin Saovaluck on 25th Dec, 2013 at 5:05pm
Lao government commits to limiting country's debt
The government is committed to limiting the country's debt and ensuring that total external debt does not rise higher than 45 percent of the nation's GDP, as approved by the National Assembly.
The move is aimed to prevent Laos from encountering a major economic crisis and ensuring the continued growth of the Lao economy, according to senior government officials.
According to an annual report from the Bank of the Lao PDR, as of the end of 2012, total outstanding external debts of Laos were recorded at over US$3 billion.
This figure represented an increase of 3.15 percent compared to 2011 and accounted for 33.43 percent of national GDP.
Of the US$3 billion owed, long-term bilateral debts covered 64.28 percent of total outstanding external debts, a rise of 12.47 percent compared to the previous year, while long-term multilateral debts covered 53.72 percent.
The bank report showed that overall debt has been declining over the last five years since it reached 48.7 percent of GDP in 2008.
Meanwhile the IMF report in November this year said that external public debt and debt servicing in Laos is projected to reach 47.4 percent of GDP for 2013 and 49.1 percent in 2014.
Prime Minister Thongsing Thammavong clarified the situation to members at the NA's ongoing session recently, detailing the government's plans and measures to deal with the rising debt.
He said the government has tried to pay down debt but in its efforts to address this issue the government has sometimes faced difficulties. "On the contrary, our debt has been increasing," he noted.
"Our domestic debt is quite heavy now. The domestic debt occurred due to the demand for national development in the wake of limited funding," Mr Thongsing said.
He said the relevant sectors failed to balance the demand for development and debt management. Many projects have been undertaken without identifying funding sources to pay the debt. In addition, many state development projects in the past years were operated without undergoing a competitive bidding process or gaining approval from the NA, leading to chronic debts.
The PM admitted that the country could experience a financial crisis if the government fails to balance revenue collection and expenditure and ensure that debt is kept under control.
"In the future, we will try to limit the debt and ensure that it doesn't reach more than 45 percent of GDP. We will try to settle our existing debt. If it is not necessary, we will not create new debts," he said.
"From now on, any project to be operated needs to identify funding sources to pay the debts. If sectors create debts, then they will be in charge of paying the debts. We will set up a committee to settle the debts."
Minister of Finance Mr Phouphet Khamphounvong told the NA session recently that although the government's external debt is high, it remains manageable because 90 percent of the external debt is in the form of low interest loans repayable over a period of 25 years.
"We are able to pay our debts and fulfill international obligations and that's why the international community gives us support and feels confident in the government's financial status," he said.
Mr Phouphet explained that the country's debt was created in the past years as various government sectors operated a lot of development projects to accelerate the accomplishment of the millennium development goals (MDGs) and poverty reduction efforts.