New debt payment system saves govt 1,682 billion kip
New debt payment system saves govt 1,682 billion kip
The government has saved more than 1,682 billion kip after introducing a new debt payment system last year, which makes it easier for companies and investors to recoup monies owed.
The Ministry of Finance introduced the new debt payment system in 2012, enabling the state to issue two or three year government bonds as a means to pay off debt.
The government owes money to v arious companies which have completed state investment projects over the past several years, as the country strives to upgrade essential infrastructure.
Under the new debt payment system, the companies will be given the choice to receive the government bonds as payments or take cash instead.
However, companies which refuse to accept the bonds and decide to take cash will have to pay 30 percent of the debt to the finance ministry as a commission fee.
According to a report from the Ministry of Finance tabled at the National Assembly in Vientiane this month, under the new debt payment system the government earned about 1,682 billion kip from companies who decided to take cash.
Since 2012, the ministry had paid debts of 10,521 billion kip to companies which won contracts to implement some of the 1,415 investment projects in the country. So far, 154 state investment project contractors have decided to take government bonds, worth a total of 4,421 billion kip.
Finance officials said that the new debt payment system not only helps the government to reduce public debt pressure but also helps the companies to access funds so as they can continue to expand their businesses in the future.
They explained that the companies which decide to take the government bonds instead of cash could sell bonds to other investors or use them as a guarantee to take out new loans from the commercial banks in the country so as they can expand their businesses.
Commercial banks in Laos have confidence in the government bonds and are interested in purchasing them for future gain. One of the main reasons commercial banks feel more confidence in the government bonds is the ongoing economic expansion in Laos and increasing government revenue streams.
Economists expect that the Lao economy will continue to grow at around eight percent per annum over the next several years with mining and hydropower as the main driving forces. A number of major hydropower projects are now under construction and expected to come on line in the next few years.
The government has now suspended the policy introduced a few years ago to allow private sector companies to invest money upfront and collect the debt later, it was announced earlier this year. The move is designed to reduce debt pressure, with the upfront private investment policy also viewed as conducive to corruption.
According to the ministry of finance, the current national debt is still below 45 percent of GDP. However, ec onomists have expressed concerns that without concrete measures in place to curb the public debt, the government will be in a difficult position when it comes to maintaining sound macroeconomic policy.
The National Assembly has urged the government to suspend debt payments to companies who have undertaken state investment projects funded upfront as part of efforts to keep money for other emergency issues including the salaries of state officials.
vientiane times
