Govt seeks to sustain economy to prevent crisis

The government has vowed to support the economy by lowering the fiscal deficit to prevent the nation from being dragged into an economic crisis.
Minister of Finance Mr Bounchom Ubonpaseuth clarified the issue for National Assembly members on Tuesday, saying that the State budget plan for the next five years was designed to sustain and address the chronic financial problems of the past few years.
“We will try to balance revenue and expenditure, meaning that we will use the budget based on the income earned or spend a little bit more than the amount we earn,” he said.

“Our budget plans for 2021 and 2022 aim to sustain the country’s economy and deal with economic difficulties. However, in 2023, 2024 and 2025, we will create a more balanced budget, meaning that domestic revenue must be sufficient for domestic spending.”
According to a government report, the fiscal deficit for 2021-25 has been set at 2 percent of Gross Domestic Product (GDP) in a bid to halt rising debt.
Mr Bounchom said spending on administrative matters was projected to increase significantly over the next five years due to rising interest rates in the payment of loans and debts, saying that the amount of money needed to repay loans is expected to increase to between 4,000 and 4,500 billion kip annually.
The government has announced that it will reduce spending on salaries and allowances for state officials from 52 to 40 percent by 2025.
“We will recruit fewer officials which will mean we will have to spend less on salaries,” Mr Bounchom said.
“The government will further implement its austerity policy by reducing spending on non-essential projects. This will mean spending less on electricity, water supply, equipment for use in public offices, and vehicles for officials and meetings. The government has spent a large amount of money on buying cars for officials which is something that needs to be addressed.” In addition, the government will encourage some budget units to become financially self-sufficient in order to ease the financial burden on the government. This is aimed at reducing spending on administrative matters from 14 to 11 percent in the coming years.
National Assembly members asked the government to raise the five-year revenue collection target from 16 percent of GDP to 18 percent. Mr Bounchom said the government would review this based on the sources of income available.
The Ministry of Finance is committed to reviewing fiscal policies, particularly those relating to tax collection.
However, those policies need to encourage Lao people to engage in business and produce goods for commercial purposes. This is aimed at increasing income streams so that Laos can generate more income to repay debts.
Mr Bounchom acknowledged that financial leaks in revenue collection continued to occur and said it was essential to revise legislation to plug loopholes in the finance sector.
The Ministry of Finance has declared that it will carry out structural reforms and use electronic systems to collect taxes and deter officials from engaging in dishonest practices.

By Somsack Pongkhao
(Latest Update March 25, 2021)