Laos cuts spending as budget crisis bites

Laos has called a halt to private-sector funding of public projects as part of measures to tighten expenditure and prevent a looming budget crisis. 

In past years the government has been reliant on the private sector to fund public construction projects either in exchange for state-owned land or delayed payment. 

However at a meeting to discuss the 2013-14 socio-economic development plan last week in Vientiane, Prime Minister Thongsing Thammavong said the practice of offering state property to companies in exchange for construction projects had benefited the private sector more than it had the government. Thongsing assigned the Ministry of Finance and the Ministry of Planning and Investment to work with relevant sectors to provide a report to the government next fiscal year on the land-exchange practice and what had been learnt through projects funded in such a way. 

“If the projects are effective, we can continue to study a policy and formulate legislation to specifically regulate this matter,” he said. 

The government will also suspend new project proposals that do not aim to boost productivity while studying measures to reduce the country’s debt, which stands at 29.8 per cent of gross domestic product. 

Earlier this year the government halted new proposals to be funded by private investment companies and paid back by the government at a later date until legislation could be enacted to regulate the practice. 

Current debt problems are partly attributed to the practice, which often saw the private sector charge overly high prices for the completed works. 

The PM assigned the Ministry of Finance and Ministry of Planning and Investment to formulate legislation to regulate projects funded in such a way, expected to be complete and promulgated at the beginning of next fiscal year. 

Despite financial difficulties, the government has made the significant decision to settle its chronic debt owed to the private sector. 

The move aims to reduce financial pressure on the government and also enable Lao entrepreneurs to have a strong financial capacity to operate their businesses.