Vientiane owes investors $30 million

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Vientiane gateVientiane authorities said on October 25 that the Lao capital owes 237.22 billion kip (around $30 million) to investors who funded 118 projects, mainly in infrastructure development. Officials said these projects are now complete following approval by the National Assembly.

Under agreements with Vientiane authorities, project contractors invested in the projects upfront with Vientiane to repay the construction cost from the state budget “at a later date”. This arrangement is normal procedure for government development projects carried out amid budget constraints.

However, such schemes are one of the main reasons the government has accumulated a large debt in recent years, which it is now struggling to repay. In light of this situation, at its monthly meeting in October, the government instructed all state bodies to suspend new, non-essential investment projects, especially the construction of offices and infrastructure development.

In an earlier meeting – the annual government conference attended by the cabinet, the Mayor of Vientiane and provincial governors – the government also instructed state agencies not to undertake projects for which no government or institutional funding is available, particularly in relation to infrastructure.

According to information disclosed by the Ministry of Finance and the Ministry of Planning and Investment in June, Laos’ debt is equivalent to 29.8 per cent of GDP, which is estimated at $10 billion for the 2012-2013 fiscal year ending September.

Finance Minister Mr Phouphet Khamphounvong told the ordinary session of the National Assembly in June that the level of debt ‘is manageable’. He explained that 96 per cent of the debt was made up of low interest loans, with rates not exceeding 2 per cent a year, “payable” over the long term. Phouphet said a major international financial institution made a favourable assessment of Laos’ financial situation, saying the 29.8 per cent figure was well below the international debt ceiling level of 40 per cent of GDP.

Laos repays debt at 7.5 per cent of domestic revenue and 3 per cent of export revenue. It is expected the debt will fall from the current 29.8 per cent to 25 per cent of GDP by 2020.

However, while the debt is judged to be manageable at present, Laos is facing severe budget constraints following the huge salary increases and supporting allowances awarded to government employees last fiscal year. The strain on the budget has forced the government to cut payment of the supporting allowance, amounting to 760,000 kip ($97) per person per month, this fiscal year.

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Reading Time: 2 minutes

Vientiane authorities said on October 25 that the Lao capital owes 237.22 billion kip (around $30 million) to investors who funded 118 projects, mainly in infrastructure development. Officials said these projects are now complete following approval by the National Assembly.

Reading Time: 2 minutes

Vientiane gateVientiane authorities said on October 25 that the Lao capital owes 237.22 billion kip (around $30 million) to investors who funded 118 projects, mainly in infrastructure development. Officials said these projects are now complete following approval by the National Assembly.

Under agreements with Vientiane authorities, project contractors invested in the projects upfront with Vientiane to repay the construction cost from the state budget “at a later date”. This arrangement is normal procedure for government development projects carried out amid budget constraints.

However, such schemes are one of the main reasons the government has accumulated a large debt in recent years, which it is now struggling to repay. In light of this situation, at its monthly meeting in October, the government instructed all state bodies to suspend new, non-essential investment projects, especially the construction of offices and infrastructure development.

In an earlier meeting – the annual government conference attended by the cabinet, the Mayor of Vientiane and provincial governors – the government also instructed state agencies not to undertake projects for which no government or institutional funding is available, particularly in relation to infrastructure.

According to information disclosed by the Ministry of Finance and the Ministry of Planning and Investment in June, Laos’ debt is equivalent to 29.8 per cent of GDP, which is estimated at $10 billion for the 2012-2013 fiscal year ending September.

Finance Minister Mr Phouphet Khamphounvong told the ordinary session of the National Assembly in June that the level of debt ‘is manageable’. He explained that 96 per cent of the debt was made up of low interest loans, with rates not exceeding 2 per cent a year, “payable” over the long term. Phouphet said a major international financial institution made a favourable assessment of Laos’ financial situation, saying the 29.8 per cent figure was well below the international debt ceiling level of 40 per cent of GDP.

Laos repays debt at 7.5 per cent of domestic revenue and 3 per cent of export revenue. It is expected the debt will fall from the current 29.8 per cent to 25 per cent of GDP by 2020.

However, while the debt is judged to be manageable at present, Laos is facing severe budget constraints following the huge salary increases and supporting allowances awarded to government employees last fiscal year. The strain on the budget has forced the government to cut payment of the supporting allowance, amounting to 760,000 kip ($97) per person per month, this fiscal year.

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