Minister clarifies budget deficit to NA members
Minister clarifies budget deficit to NA members
Minister of Finance, Mr Phouphet Khamphounvong clarified the budgetary situation to National Assembly members at the ongoing NA session on Wednesday, saying the rising budget deficit is a result of the revenue shortfall last fiscal year.
The clarification was made in response to concerns raised by NA members, notably on the issues surrounding the country's growing debt and also macro-economic financial stability.
“The budget deficit occurred because our country needs a lot of funding to support development projects. It means we spent more than we earned,” he said.
The NA approved the budget deficit for the government in the previous year, equivalent to more than 5 percent of Gross Domestic Product (GDP).
According to the Ministry of Finance report, the budget deficit for the 2012-13 fiscal year reached 4,409 billion kip, equal to 5.47 percent of the GDP.
The minister convinced the NA that a budget deficit is essential for Laos to stimulate the country's development and poverty reduction.
“We cannot avoid the budget deficit because our country is underdeveloped. We need more funding to boost economic growth,” Mr Phouphet said.
“Our demand for development is huge. We want to do many things and build many projects. But our capacity to collect the revenue is limited. The only way to fill in the deficit is to borrow from other sources including from overseas.”
In the past, some countries have addressed deficit by printing more banknotes, but this is considered an inappropriate way to address the gap because it could affect the stability of the national economy, he said.
“In the past, some provinces collected more revenue than targeted but on average, we have failed to collect revenue based on the targets set. The reason is because our capacity to identify sources of revenue is limited, leading to revenue losses,” he said.
He said the provinces that cannot collect revenue on target included Khammuan, Luang Prabang and Luang Namtha. In addition, the revenue from ODA is still limited and will continue to be limited.
In order to respond to the needs for rising expenditure the government has borrowed money from other sources, including from overseas.
The NA members have warned that the loans must ensure that the country's debt remains at a manageable level to prevent the country from heading towards an economic crisis.
Most agreed that the government needs to work harder on revenue collection and limiting financial leakages.
In 2012-13, the government set a plan for revenue collection higher than what was achievable in an effort to respond to the demands of national development.
The revenue shortfall has fo rced the government to stall many development projects to avoid a fiscal crisis. The revenue shortfall is the reason for slow payment of the salaries for officials in many province s.
Some development projects have been implemented by local authorities in some provinces without authority while other projects are essential for the country's development.
The minister proposed to include those projects in this fiscal year's list of projects as a way to handle the problem.
vientiane times
