Logo of Phnom Penh Post newspaper Phnom Penh Post - Potential fall in revenue adds to Laos debt burden

Potential fall in revenue adds to Laos debt burden

Potential fall in revenue adds to Laos debt burden

Laos' domestic revenue is expected to decline further from 13.5 per cent last year to 10.2 per cent of gross domestic product (GDP) this year, the World Bank said in a report.

Consequently, the fiscal deficit is expected to reach 7.6 per cent of GDP, rising from an estimated 5.1 per cent of GDP last year.

The elevated fiscal deficit will result in growing public debt, which will ramp up pressure on the country’s debt servicing capacity amid the Covid-19 crisis.

The cabinet’s recent monthly meeting chaired by Prime Minister Thongloun Sisoulith approved a report on pushing for greater revenue amassment for the rest of the year as part of efforts to ease the country’s financial difficulties.

The Ministry of Finance was instructed to coordinate with the relevant authorities to elevate national income to a level approved by the National Assembly.

The ministry has been advised to accrue more revenue from land, fees from concession projects and other obligations owed by business units.

Royalties from hydropower projects and other fees from mining projects that have not been paid to the government need to be collected.

In June, the National Assembly approved the government’s move to adjust the budget by lowering the target for national revenue from 28.99 billion kip to 22.72 billion kip ($3.14 million to $2.46 million).

However, the budget deficit is projected to rise due to the prolonged impact of the Covid-19 epidemic on businesses.

Laos is undergoing an unprecedented level of macroeconomic stress and the pandemic has worsened an already fragile economic landscape.

Low domestic revenue mobilisation has been exacerbated by the economic slowdown and the Covid-19 outbreak.

Structural vulnerabilities in Laos have led to substantial deterioration in macroeconomic circumstances, including a significant increase in the public debt burden.

Without actions to stabilise the macroeconomy and accelerate structural reforms, the economy could tip into a period of extreme macroeconomic vulnerabilities.

The government is attempting to mitigate the economic impact of Covid-19 by deferring tax payments, along with other measures, to support households and small and medium-sized enterprises (SMEs).

According to the World Bank, the Bank of the Lao PDR has engaged in direct borrowing from commercial banks to help the government meet debt service obligations and provided direct credit to the government to meet its expenditure demands.

To address the budget deficit and repay debts, the government attempted to issue bonds to mobilise more funds and borrow more money from various sources.

The government is also working to expand the e-tax payment system to all provinces and more sectors. As a result, income from the tax sector rose by 20 per cent in the first six months of last year compared to 2018.

In addition, the government will cut spending on non-essential projects that do not guarantee economic returns.

VIENTIANE TIMES/ASIA NEWS NETWORK

MOST VIEWED

  • ‘Education’ a priority traffic-law penalty

    A top National Police official on June 21 neither rejected nor confirmed the authenticity of a leaked audio message, which has gone viral on social media, on a waiver of fines for a number of road traffic-related offences. General Him Yan, deputy National Police chief in

  • Volunteer scheme to foster ‘virtuous’ humanitarian spirit

    A senior education official said volunteer work contributes to solidarity and promotes a virtuous humanitarian spirit among the youth and communities. Serei Chumneas, undersecretary of state at the Ministry of Education, Youth and Sport, made the comment during the opening of a training programme called “

  • Chinese firms unveil preliminary results on metro, monorail for capital

    Minister of Public Works and Transport Sun Chanthol and representatives from China Road and Bridge Corp (CRBC) and its parent company, the state-owned China Communications Construction Co Ltd (CCCC), met on June 24 for talks on results of the firms’ preliminary study on a potential metro

  • ACLEDA, WU to enable global money transfers

    Cambodia's largest commercial bank by total assets ACLEDA Bank Plc and global money transfer firm Western Union (WU) have partnered to offer customers cross-border money transfers to 200 countries via “ACLEDA mobile” app. In Channy, president and group managing director of ACLEDA, said the June 22 agreement

  • Aeon, Micromax partner again for third mall

    AEON Mall (Cambodia) Co Ltd and a locally-owned Micromax Co Ltd have entered into a partnership agreement to develop fibre optic infrastructure for $200 million Aeon Mall 3, which is expected to be opened in 2023. The agreement was signed on June 20 between Masayuki Tsuboya, managing director of

  • Walmart plans to diversify stock of Cambodia goods

    Walmart Inc, the world’s biggest retailer, on June 22 reiterated recent plans to scale up and greatly diversify its purchases of Cambodian products, according to the labour ministry. This came during a virtual working meeting between Minister of Labour and Vocational Training Ith Samheng and