Govt urged to suspend debt payments to unapproved projects
Govt urged to suspend debt payments to unapproved projects
The Standing Committee of the National Assembly has recommended that the government temporarily suspend the payment of debt for projects previously undertaken outside its plan.
The proposed suspension is made at a time of budget tension in order to secure the state budget and ensure it has sufficient funds to meet the government's increased spending demands for its administration including salary payments.
The committee and the government cabinet met early this week in Vientiane, ahead of the NA's fifth ordinary session scheduled to take place early next month, to discuss various issues.
These projects, whose debts they have asked to be suspended temporarily, were initially funded by private investors known as outside plan projects.
Months ago, the government decided to suspend state-invested infrastructure development projects that are first financed by a private contractor who is later repaid by the government, until regulations are in place to b etter manage this kind of operation.
T he decision came after there had been reports suggesting that many projects have not undergone a regulated bidding process driving the cost unreasonably high which has swollen the state debt. In some cases, reports also emerged that this operation left loopholes for corruption.
Following the decision, however, several projects were reportedly undertaken under a similar system.
At present, the country's debt is equivalent to 29.8 percent of gross domestic product (GDP), while GDP for this fiscal year that will end in September is estimated to reach US$10 billion, a growth of about 8 percent compared to the year before, according to information from the Ministry of Finance and the Min istry of Planning and Investment.
Finance Minister, Mr Phouphet Khamphounvong told the meeting that the level of Lao debt ‘is manageable'. He explained that 96 percent of the total debt is low interest-rate loan of not more than 2 percent a year with long-term repayment.
An international financial institute, he added, assessed that the Lao financial situation was in a good state, saying that the 29.8 percent debt remains much lower than the international ceiling level of 40 percent of GDP.
Laos repays debt at 7.5 percent of domestic revenue and 3 percent of export revenue. It is expected that the Lao debt will decline from the current 29.8 percent to only 25 percent of GDP by 2020, Mr Phouphet said.
Although the Lao debt is at a manageable level, the state budget experienced a heavy financial burden following the big increase in salary and the provision of a supporting allowance for state employees.
This fiscal year, salaries were increased from 3,500 kip to 4,800 kip per index (a 37 percent increase). The government also granted a supporting allowance of 760,000 kip per person per month to cover the cost of electricity, water, and clothing.
Director General of the Finance Ministry's Budget Department, Mr Saisamone Xaysoulien, said that such an increase represents a 140 percent increase in budget spending on salaries and allowances, saying that it is a big burden.
To overcome financial tension, the committee asked the government to consider only increasing 1,000 kip per salary index instead of the 1,900 kip planned during the first six months of the next fiscal year before further consideration on increasing to 1,900 per index for the last six months, if revenue collection and socio-economic development prove capable of handling this.
vientiane times
