Bond decree to source finance for govt
Bond decree to source finance for govt
A new decree issued recently is set to boost the government’s efforts to source more financing from domestic and overseas sources to fund further socio-economic development.
The 15-page decree on government bonds defines the principles, measures and regulations on issuing bonds, bond sale and bond disbursement in a transparent manner that can be inspected.
This aims to mobilise finance from domestic and foreign sources for national socio-economic development over each period, the decree says.
Prime Minister Thongloun Sisoulith told the ongoing Ordinary Session of the National Assembly (NA) recently that the government will attempt to manage bonds better in order to create more confidence among buyers.
Under the decree, the state promotes the development of diverse domestic bond and capital markets with proper management and a protection system as an effective financial source to balance its budget.
Bonds will be issued in line with annual, middle-term and long-term budget plans, which are approved by the NA. They must also ensure the stability of the macro-economy and the security of the national budget, according to the decree.
Bonds have been a useful source of financing for the government as it attempts to redress its budget deficit.
This year, the government has set the budget deficit at no more than 8,461 billion kip as it is targeting revenue collection of 23.941 billion kip, while expenditure has been set at no more than 32.402 billion kip, according to the 2017 Socio-Economic Development Plan approved by the NA.
The long-standing budget deficit has contributed to the accumulation of a high level of public debt.
Director General of the National Economic Research Institute, Dr Leeber Leebouapao, warned the government to ensure that debts that must be paid in the short term should not constitute more than 50 percent of the country’s gross domestic product (GDP).
“But longer term debt that will be disbursed in the next 20 or 30 years could be higher [than 50 percent of GDP],” he told Vientiane Times.
The appropriate level of debt also depends on the disbursement capacity of a country, meaning that if a country has or is going to have more revenue sources it could borrow more or sell more bonds, Dr Leeber said.
The new decree defines regulations for selling government bonds domestically and also in foreign countries.
The government is currently seeking to sell bonds in Thailand, Thai media reported recently.
The Thai government has given a green light to Laos to issue baht-denominated bonds worth Bt7 billion to refinance its debt, Thailand’s The Nation reported, citing the Director-General of the Thai Public Debt Management Office, Suwit Rojanavanich.
The period of fundraising runs from May 1, 2017 to January 31, 2018.
