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New law sets public debt at not more than 25 percent of revenue

The government will be the only authority to determine the size of public debt, which must not be over 25 percent of annual state revenue.
A debate by National Assembly (NA) members yesterday made this stipulation concerning the Law on Public Debt.
Deputy Prime Minister and Minister of Finance, Mr Somdy Duangdy, introduced a draft of the law to the Assembly.

NA members wanted to know whether provincial People’s Assemblies had the right to determine debt at the local level and what the debt ceiling might be.
Deputy Minister of Finance Mrs Thipphakone Chanthavongsa, representing the drafting subcommittee, explained the government’s policy on debt management, saying the law stressed the centralised creation of debt by the government.
If any of the provinces want to borrow money for development purposes, they have to follow the procedures stated in the law by making a proposal to the Ministry of Planning and Investment and the Ministry of Finance.
The government would allocate grant assistance and soft loans to provincial projects as agreed, she added.
People’s Assemblies could assist in the consideration of such funding but could not make decisions themselves during the period of economic restoration in the next five to six years, Mrs Thipphakone said.
Under the law, public debt should not amount to more than 3.3 trillion kip or about US$400 million, which equates to 25 percent of annual revenue.
The matter of guarantees in debt clearance for businesses was also raised by NA members, who asked why the government could not do that under the proposed law.
The deputy minister said the government was unable to do that for businesses that were not fully state-owned, because of the current financial difficulties.
But, she said, the government would give a guarantee to any business if it was confident of the true status and soundness of the business.
Mrs Thipphakone said that other countries, including those with strong economies, also did not provide guarantees for debt clearance for the private sector.
The government would back any business applying for a loan by if their operations complied with the law and benefited the nation, Mrs Thipphakone added, saying the government aimed to build trust among lenders.

By Times Reporters
(Latest Update
June 19,
2018

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