Baht bonds to close budget gaps
Baht bonds to close budget gaps
The Lao government is set to issue more Thai baht-denominated bonds worth 3 billion baht or US$100 million to fill the revenue shortfall from last fiscal year's budget.
The Ministry of Finance will manage the bond issuance, which comes after an oversubscription to the government's debut 1.5 billion baht three-year bond issuances in June.
Ministry Office Head, Mr Bounzoum Sisavath, said a committee would be set up to channel the funds raised from the bonds into priority infrastructure projects in health and education.
He said the measure would help to balance the budget deficit.
At 19.5 trillion kip, Laos had reached just 78.38 percent of its annual revenue target by August, a month short of the end of the 2012-13 fiscal year. The government was forced to freeze employees' salaries and cut allowances to top-ranking officials in the face of budget constraints.
Mr Bounzoum said the funds from bond issuance could not be used to pay salaries. Rather, the cash injection will be used to ensure that development projects continue as planned despite the weak economic circumstances.
According to Twin Pine Consulting Managing Director Mr Adisorn Singhsacha, Thailand's Ministry of Finance gave approval last September for foreign entities to raise funds in Thailand through bond issuances, to a maximum value of 62 billion baht.
The Lao Ministry of Finance was one of the foreign entities to take up the offer.
The Export-Import Bank of Korea was set to issue bonds valued at 12 billion baht and the Korea Finance Corporation for 10 billion. Eight billion baht was to be issued each by Citigroup Inc., the First Gulf Bank, the Korea Development Bank and the Korea Gas Corporation, while the International Bank for Reconstruction and Development was set to raise 5 billion baht. The period of issuance of baht-denominated bonds or debentures in Thailand was from September 1, 2013, to May 31, 2014.
To authorise the bond issuance, the Thai ministry considered the potential impact on bond issuance by Thailand-based private-sector entities, the opportunity for Thai investors to invest in high-quality fixed-income assets with a reasonable return, and the overall development of Thailand's domestic bond market.
Mr Singhsacha said Laos had been welcomed in the international capital market because of its consistent economic growth, which has been at an average of about 8 percent annually over the last decade.
The country has maintained its annual economic growth for fiscal year 2012-13 and has kept the inflation rate at 7.4 percent.
However, some economists expressed concern over rising debt as a result of the revenue shortfall, which could result in an inflation rate higher than annual growth.
vientiane times
