Budget deficit remains a challenge
Budget deficit remains a challenge
The Ministry of Finance has described some of the various challenges the country will face this year, not only in terms of coping with the budget deficit but also in repaying debts incurred through loans and bonds.
The government has set the budget deficit at 8,461 billion kip this year, equal to 6.52 percent of Gross Domestic Product (GDP).
In the meantime, the government will need to repay loans and domestic and foreign bonds amounting to 6,591 billion kip, according to the Socio-Economic Newspaper report recently.
Deputy Minister of Finance, Mr Asaphangthong Siphandone clarified that the government would mobilise funding from two main sources to address the above issues.
The loans of 8,800 billion kip will be sourced from Laos and overseas.
The Ministry of Finance also plans to issue bonds worth 3 trillion kip aiming to address the deficit.
This year, the government increased the salary for State employees (at 500 kip per index point), starting from January 1, and has also committed to pay additional salaries and allowances for members of the National Assembly and the Vientiane and provincial People's Councils.
These measures will place greater challenges for the government to seek more funding to respond to the budget expenditure and push for greater development in Laos.
Late last year, the National Assembly (NA) approved the government's budget plan, setting the national revenue to be collected at 23,801 billion kip and the budget expenditure at up to 32,262 trillion kip.
Economists commented that budget deficits are common in least developed countries like Laos given that the landlocked Asian nation requires huge capital and investment funding to sustain economic growth of 7-7.5 percent over the next five years.
However, it's critical to ensure that unauthorised development projects won't be initiated which will make it difficult for the government to control the country's debts.
In theory, the budget deficit should not be raised above 5 percent of GDP. In the short term, the deficit could be okayed but in the longer term, the deficit might drag the country towards rising chronic debts.
One of the most important ingredients to note is to boost national revenue by clearly defining sources of revenue and creating new income sources.
The economists also recommended that the government will need to work harder in closing loopholes in revenue collection and strongly punishing officials who are caught violating the laws.
In 2015, many companies declared that they lost profits and therefore declined to pay profit taxes to the government.
This issue needs to be strictly inspected to identify if in fact those companies really recorded losses or not.
Laos has faced a revenue shortfall over the past four or five years. The shortfall is linked to several factors including falling prices of mineral commodities and oil on the world market.
Secondly, there were loopholes in revenue collection which need to be addressed.
Laos is a least developed country in Asia with the total GDP value of 108.709 trillion kip (US$13.27 billion), recording economic growth of 6.9 percent last year.
