Public spending can drive growth: economist
Public spending can drive growth: economist
Public spending needs to be encouraged to boost economic growth and job creation in Laos amidst the country's financial pressures and slower growth, a senior economist has suggested.
Dr Leeber Leebouapao of the National Economic Research Institute told Vientiane Times yesterday that “Our country is facing economic setbacks so public spending is one of the main drivers to boost national growth.”
In addition, he supported the advice given by Prime Minister Thongsing Thammavong, who instructed the relevant sectors to pursue financial thrift while curbing financial leaks and extravagant spending.
Mr Thongsing was addressing the government's monthly meeting held on October 22-23, which was also attended by other cabinet members.
He urged all sectors to strictly pursue a decree in regards to financial thrift with regards to the state budget, to ensure that money was well spent.
“Our Prime Minister has advised us to spend government money on essential projects. This does not mean that we should not spend. On the contrary, he implied a move to encourage spending to boost business operation and generate job opportunities which, in return, could generate taxes for the government,” Dr Leeber said.
For instance, the boat racing and That Luang festivals are events where people spend a lot, which is also good for the economy.
Laos has faced financial difficulties in consecutive years as a result of the country's revenue shortfall.
The shortfall is related to several factors including the drop in the price of mineral commodities on the world market, companies evading the payment of taxes, and other financial losses.
In May this year, Minister of Finance Dr Lien Thikeo told the media that many companies did not have bank accounts and other companies reported losses so they didn't have to pay profit tax.
“During times of economic setback, public spending can help to minimise the problem given that when businesses earn money they will be willing to pay taxes,” Dr Leeber said.
“Raising taxes should be avoided at this time because it could force more businesses to evade tax payment.”
The national budget expenditure for the 2015-16 fiscal year is set to reach 35,000 billion kip, of which about 9,800 billion kip will be spent on the payment of salaries and allowances for state officials while another 6,209 billion kip will be used for debt repayment.
Dr Leeber said the amount of cash in circulation was the same but it was important that the state budget be used wisely and efficiently.
