Lao National Assembly warns govt on possible impacts of high debt

Somsack Pongkhao in Vientiane/Vientiane Times
Asia News Network

Vientiane (Vientiane Times/ANN) - National Assembly (NA) of Laos has expressed its concern about high public debt in Laos and has warned the government not to operate any projects without its approval.

The Assembly drew up a resolution at the closing ceremony of this month's session on Wednesday, which noted that public debt was already high.

The Assembly asked the government to take this matter into consideration, with members saying that operating projects without NA approval could lead to chronic debt, which may spiral out of control and lead the country into recession.

Spelling out its resolution, the NA asked the Ministry of Planning and Investment to consider any projects that have not yet been approved and put them in the plan for this fiscal year.

Assembly members observed that many provinces allow private companies to develop transport infrastructure using their own capital, which the authorities then repay at a later date.

Government officials de-fended this practice, saying it was important to carry out some projects before seeking NA approval as those projects were very important for the country's development and to sustain local people's livelihoods.

For instance, the Khammuan provincial authorities gave permission for companies to spend 3 billion kip to repair irrigation systems damaged by widespread flooding this year. If the authorities hadn't taken this step, the impact could have been much worse.

Lao economist Dr Liber Libuapao said that allowing private companies to carry out work helped to boost economic growth and national development, but the government needs to prioritise projects that are essential for the well-being of the Lao people.

He agreed that the government can allow companies to help in building irrigation or other infrastructure to facilitate productivity and ease poverty in local communities.

Dr Liber said it was also important that the government identify a source of income to pay off its debts, otherwise the country could run into financial problems.

"The most important thing is that we have to be ready to deal with debt," he said, saying that less important projects should be postponed.

According to the Ministry of Finance, public debt in Laos stands at about 45 percent of Gross Domestic Product (GDP).

Dr Liber said public debt has reached an alarming level and all sectors need to turn their attention to managing the situation.

One of the least developed countries in Asia, Laos started out with no infrastructure following liberation in 1975, so the need for rapid development is great.

This month's NA session also approved an increase in the budget deficit for this fiscal year from 2.1 trillion kip (US$263 million) to 3.21 trillion kip, equating to 4.6 percent of GDP, and an increase in budget expenditure from 17,831 billion kip to 18,977.4 billion kip, to maintain economic growth.

The Lao economy is growing at about 8 percent annually but the country mainly relies on Overseas Development Assistance and natural resources, which are considered unsustainable sources of revenue.