Finance minister addresses budget deficit worries
Finance minister addresses budget deficit worries
The government will be able to keep the macro-economy stable despite facing a bigger budget deficit next fiscal year, Finance Minister Mr Phoutphet Khamphounvong said yesterday.
“The budget deficit will be higher than in previous years but we are confident that the bigger budget deficit will have no impact on macro-economic stability,” the finance minister said at the ongoing session of the National Assembly.
A number of NA members have raised concerns about macro-economic instability after the Ministry of Finance announced last week that the budget deficit next fiscal year would reach 3,842 billion kip (US$480 million), representing 4.76 percent of GDP.
One of the main causes of the larger budget deficit is the government's plan to increase salaries and provide an additional living allowance for state officials. The government plans to collect revenue of 19,543 billion kip (US$2.4 billion) in the 2012/2013 fiscal year and spend about 23,385 billion kip (US$2.9 billion) in the same year.
Mr Phoutphet said that despite the sharp increase in the budget deficit, Assembly members should not worry about macro-economic instability as the deficit was still manageable.
“I consider that the budget deficit, at 4.76 percent of GDP, is still below the ceiling. The maximum deficit ceiling should not exceed 5 percent of GDP.”
He said the government would not ask the Bank of the Lao PDR to print more banknotes to address the deficit, so it was impossible that there would be higher inflation.
Mr Phoutphet said the government would borrow 1,742 billion kip (US$218 million) from foreign countries to implement development projects, adding that this would help to address the budget deficit.
The government expects to mobilise the rest of the funding from the bond market, with the Lao Securities Exchange to provide a bonds transaction service next fiscal year.
The Ministry of Finance is building confidence among local and foreign private sectors about purchasing government bonds, he said, adding that this will enable the government to sell bonds and mobilise investment funding to boost development.
Mr Phoutphet said the government would allocate budget funding to pay off the interest and make sure investors are confident about purchasing the bonds. The government plans to use surplus revenue, which it collects every year to pay off the bond debts when they mature.
The government is currently collecting more revenue than expected, and is projected to exceed the revenue target by five percent this fiscal year.
If the government cannot exceed its revenue collection target, it will continue to sell bonds so that it has enough money to pay the bond debt, which is normal practice in many countries.
Mr Phoutphet said the government would sell bonds in foreign countries, helping to mobilise more funding for development projects
vientiane times
