Finance ministry to pay govt debt in bonds
Finance ministry to pay govt debt in bonds
The Ministry of Finance will pay debts owed by the government to construction contractors in the form of bonds.
The ministry circulated the new regulation to media outlets in Vientiane last week as part of its efforts to communicate with construction contractors about debt payment and strict enforcement of the new policy.
The regulation was signed by Finance Minister Phouphet Khamphounvong in February.
The three-year government bond interest rate is 3.5 percent annually, while the interest on a two-year bond is 3 percent. The government will pay the interest rate once a year. Bond holders can use the bond as a bank loan guarantee.
Project construction contractors who refuse to accept bonds and insist on being paid in cash will receive only 70 to 80 percent of the total project cost, because the finance ministry will cut the debt.
Under the new regulation, construction companies working on government office buildings and roads must sacrifice 20 to 30 percent of the total project cost if they want the government to pay them in cash.
The ministry does not explain why it would cut the amount owed by 20 to 30 percent when paying in cash, and finance officials have varying opinions on the matter.
Analysis shows Mr Phouphet has made a critical decision and looks likely to be able to address the problem of delayed debt payment.
As a former Governor of the Bank of the Lao PDR, he can expect to get cooperation from banks to lend the money needed for debt payment. The ministry can use the 20 to 30 percent deduction to pay off the interest on bank loans.
Some officials say the new regulation would cut opportunities for government officials to take bribes from construction firms who want them to expedite payment of the money owed.
“The ministry wants to put a stop to government officials asking for a commission when helping a company to get their payment processed,” said one finance official.
He said the new regulation will not only help the ministry to generate more revenue but will also speed up the payment of government debts.
Many businesspeople are complaining that they have to pay a large amount to government officials if they want the Ministry of Finance to pay the money owed them by the government. Those who pay sooner can expect to get the money they are owed in a shorter period of time.
Business operators say that if they do not pay the requested commission, officials delay the documentation process while others reject the request for payment, saying they do not have the cash in hand when in fact they often do.
vientiane times
