Govt details measures to control, repay public debt

The government will reduce the budget deficit to zero by next year to ensure that the country’s high level of public debt can be repaid as p romptly as possible, Deputy Prime Minister Somdy Duangdy told the National Assembly (NA) last week.
Mr Somdy, who is also Minister of Finance, said “We will ensure our spending plan is set at a level commensurate to what we earn,” when addressing the Assembly’s seventh ordinary session. 
“It is a challenging issue.”

The DPM was responding to questions raised my MPs about what measures the government is taking to manage and repay its seemingly chronic debt. 
The deadline for several large debt repayments to external lenders is approaching.  Currently, public debt exceeds 60 percent of the country’s gross domestic product (GDP). Debts to external lenders equals about 53.34 percent of GDP,   or approximately US$9.7 billion.  This is a 14.02 percent increase over 2017 figures.
To limit and repay its external debts, the government will strive to have a budget surplus by the 2021/2022 financial years. 
In order to repay the principal of its external debt, the government will need to find additional financial sources as well as cut spending.
“This year, the government is determined not to borrow from any external sources to make its loan repayments.  We will seek money from internal sources only,” he said.
“If moneys are still insufficient, we have several other options by which we can accumulate finances.  This includes issuing government bonds.”       
The government’s actions to reduce public debt are in accordance with the Law on Public Debt.  As such, the government can only borrow monies when special conditions are in place.  These include long-term repayment periods of at least 25 years, interest rates not exceeding 1.5 percent and six to seven year repayment free periods.
To control spending, the government has cancelled all unnecessary projects and limited the number of new ones to those that are essential, the DPM said.
It is hoped that a state investment focus will accelerate the completion of some already existing programmes.
Authorities have carried out inspections of project sites to ensure investment costs are reasonable in another measure to control spending.
“While the deficit and debt has been reduced, public debt is still high,” the DPM told the MPs, admitting that Laos will continue to suffer debt-driven tensions for at least the next two or three years.
When visiting Japan recently, Prime Minister Thongloun Sisoulith told Japan’s Nikkei Asian Review that Laos only borrows money for “high-efficiency projects which are long-term and that have low interest rates.”

By Souksakhone Vaenkeo
(Latest Update June 17, 2019)