Govt should maintain budget deficit at lower than 5 percent
Govt should maintain budget deficit at lower than 5 percent
Economists have warned that the government should maintain a budget deficit of not more than 5 percent of Gross Domestic Product (GDP) to prevent the country from accumulating chronic debts.
The move comes after the budget deficit rose to over 5 percent of GDP last fiscal year, attributing to the country's rising demand for development projects, including unauthorised projects.
For the fiscal year 2015-16, the government has revised the state budget, reducing the national revenue target from 29.213 trillion kip to only 26.159 trillion kip and budget expenditure from 35 trillion kip to 31.946 trillion kip.
But the budget deficit is set at 5.787 trillion kip, accounting for 5.7 percent of the GDP, according to a report from the Ministry of Planning and Investment.
The government will prioritise its spending on paying the salaries of state employees, public debts and state investment projects to further boost national economic growth.
Nevertheless the budget deficit will remain a greater chall enge for the government as a result of the country's revenue shortfall. This means the government has to seek more funding from other sources including issuing bonds and asking for loans from other countries to fill in the budget deficit.
A senior economist from the National Economic Research Institute Dr Leeber Leebouapao told Vientiane Times yesterday that “In my opinion, the budget deficit should not be higher than 5 percent of the GDP at this time as our country is facing economic slowdown.”
“If we fail to control the deficit, our chronic debts could escalate beyond our capacity to manage it.”
National Assembly members commented that unauthorised projects should not be carried out as they made it hard for the government to manage the budget and its debts.
Dr Leeber accepted that borrowing money to pay debts could only address the problem in the short-term but it was better than allowing the country's debt to rise even further.
The revenue shortfall in Laos has occurred for several years. One of the main factors behind the shortfall is that many companies (both small and large) try to avoid paying taxes to the government via various means.
Another factor was financial leakages, which if not addressed could bring greater damage to the nation while income from the mining sector has declined as a result of falling prices for commodities on the world market.
The revenue shortfall also resulted in slow payment of officials' salaries and affected development projects in Laos over the past years. For the 2014-15 fiscal year, the country's budget deficit was expected to be 5 percent of Gross Domestic Product (GDP).
In 2015-16, the Lao economy is set to grow at around 7.5 percent and the val ue of GDP is expected to exceed 115.452 trillion kip while income per capita should reach 16.7 million kip.
