Govt unveils foreign aid projection

The government is anticipating a significant drop in the amount of foreign grants it will receive this year, so the country will have to make some policy changes to sustain revenue generation.
According to the National Socio-Economic Development Plan for 2019, the government expects to receive grants from development partners worth 2,065 billion kip (about US$240 million) this year.
This amount is 24 percent less than the figure targeted in 2018, it was stated in the 2019 national development plan distributed at the recent annual meeting of finance and planning officials.
Officials who drew up the plan explained that the drop in foreign aid was likely, saying that development partners who formerly financed development projects in Laos were facing economic constraints.
They also said that some development partners had suffered severe natural disasters so they had less financial aid available for poorer countries, which affected the flow of foreign aid to Laos to some extent.
Despite these challenges, the writers of the plan were optimistic that foreign donors would continue to support Laos in the coming years. This was especially true because they would be keen to help Laos achieve the UN-initiated Millennium Development and Sustainable Development Goals.
But some officials working for international organisations are of the opinion that the decline in foreign aid is not only based on global and regional economic factors.
One of the reasons was Laos’ emergence as a new middle-income country in the region, they said. 
Laos has experienced remarkable economic growth in recent years and its relative prosperity means it can no longer be considered a poor nation. Development partners will instead shift their focus to other countries which are in greater need of support.
The effectiveness of foreign aid is one of the issues to which the government must pay attention, while some development partners are also assessing the true impact of the aid they provide.
International development partners have been helping Laos to strengthen economic reform and opening up, as part of efforts to boost domestic revenue collection and sustain economic growth.
The Lao government has committed to a programme of economic reform and opening up after introducing the market oriented economy in 1986.
Foreign aid has played a key role in helping the government to fulfil its revenue collection plan. According to the plan for 2019, the government expects 26,305 billion kip (US$3 billion) in total revenue, of which US$240 million is supposed to come from development partners in the form of grants. 
The decline in foreign aid is a clear indication that Laos will have to change tack in the way it sources revenue, to ensure it can balance the budget.

By  Ekaphone Phouthonesy
(Latest Update January 26, 2019)