Sign up | Log in



Home  >>   Daily News  >>   Laos News  >> Economy  >> Debt-Laden Laos Told To Tighten Policies Amid Economic Concerns
NEWS UPDATES Asean Affairs   7 October 2013  

Debt-Laden Laos Told To Tighten Policies Amid Economic Concerns

Debt-ridden Laos has been told by the International Monetary Fund to tighten its policies to avoid a major economic crisis.

An IMF mission held annual consultations recently with the government in the country's capital Vientiane, raising concerns about its rising inflation, the banking system, public spending, deteriorating current account deficit and falling international reserves, according to the Washington-based Fund's officials.

"A tightening of macroeconomic policies is urgently needed to reduce vulnerabilities, replenish international reserves and engineer a soft landing," Ashvin Ahuja, who led the IMF mission from Aug. 28 to Sept. 12, said on his return to the U.S. capital.

The IMF warning came amid a persistent shortfall in revenue, which led Prime Minister Thongsing Thammavong to order ministries and government agencies last month to closely control expenditures for Laos to pay its debts and avoid a financial crisis.

“In general, Laos is running a high level of debt and is at risk of a financial crisis," Thongsing said, according to the state-controlled Vientiane Times newspaper. "This means we should closely control all aspects of investment and sharpen our focus during the upcoming 2013-14 fiscal year.”

Finance Minister Phouphet Khamphounvong told the national Assembly, the country's parliament, in July that the government debt is  29.8 percent of Gross Domestic Product (GDP), or the country national output. The debt to GDP ratio is one of the indicators of the health of an economy.

Delay payments

It is not immediately clear how much higher the debt level has risen since then but the prime minister has said, according to Vientiane Times, that "to turn the situation around" the government would delay paying monies owed to contractors carrying out its own projects to "take the strain off the country's financial and currency concerns."

IMF's Ahuja said in a report this week that inflation in Laos "is accelerating" as a result of rising fresh food prices and credit growth—partly driven by public spending—"raises concerns about the health of the banking system."

"The current account deficit has deteriorated significantly, which is a product of a currency appreciation in real terms, a growing fiscal deficit, and strong domestic demand," he said.

He called for Laos to build up its international reserves "for precautionary needs," cautioning that "ongoing fiscal expansion has exacerbated vulnerabilities."

Ahuja said Laos's fiscal policy needs to be put back on a "consolidation path" during the next few years.

This, he said, will require improving tax collection by broadening the tax base and eliminating exemptions while rationalizing expenditure to concentrate on priority social spending and investments.

The kip, Laos's currency, should move in line with market conditions and external developments, he said.

Credit targets should be lowered, financial sector supervision strengthened and regulatory measures put in place to reduce leverage, said Ahuja, who had met with the Lao authorities, donors, private sector representatives and other stakeholders during his visit.

"If these policies can successfully be put in place, it would help to achieve high, sustainable growth over the medium term.”

Inflation higher than growth

The Lao economy has been growing at around 8 percent, driven by mining and hydropower.

Government spokeswoman Bounpheng Mounphoxay said last week after a meeting chaired by the prime minister that participants recognized a number of economic challenges facing Laos, including an inflation rate forecast to be higher than the growth rate, Vientiane Times reported.

No figures were given but the IMF had said in April that inflation was more than seven percent.

Bounpheng acknowledged "significant" increases in state spending amid lower-than-expected revenue, saying it posed a challenge, the newspaper said.

The government is also "struggling" with debt payments, while the distribution of salaries to state employees in some provinces has been slow, it said.

Bounpheng also said the government may halt the 760,000 kip (nearly U.S. $100) monthly allowance paid to state employees to ease its financial burden.

However, the government will stand by its commitment to increase officials' monthly salary by almost 40 percent, she said.

Reach Southeast Asia!
10- Nations, 560- Million Consumers
And $1 -Trillion Market
We are the Voice of Southeast Asia Media Kit
The only Media Dedicated to Southeast Asia Advertising Rates for Magazine
Online Ad Rates

Comment on this Article. Send them to

Letters that do not contain full contact information cannot be published.
Letters become the property of AseanAffairs and may be republished in any format.
They typically run 150 words or less and may be edited
submit your comment in the box below

Today's  Stories    7 October 2013 Subsribe Now !
• APEC strengthens Indonesia's position as regional power Subcribe: Asean Affairs Global Magazine
• Singapore, Mexico boost bilateral relations Asean Affairs Premium
• Singapore is destination for junk bonds
Research Reports
on Thailand 2007-2008

•Textiles and Garments Industry

•Coffee industry

•Leather and footwear industry

•Shrimp industry

• Trade down 17.3% on exports slide
• Debt-Laden Laos Told To Tighten Policies Amid Economic Concerns
• Exports of rice to decrease sharply
• President to attend Bali APEC meet
Asean Analysis           7 October  2013 Advertise Your Brand
• Asean Analysis- October 7, 2013
Picking up the Pieces: Washington Cancels the President’s Asia Trip
• Asean Weekly:The Biweekly Update 4 October  2013
Asean Stock Watch     4 October  2013
• Asean Stock Watch-October 4, 2013 

ASEAN NEWS UPDATES      Updated: 04 January 2011

 • Women Shariah scholars see gender gap closing
• Bank Indonesia may hold key rate as inflation hits 7 percent
• Bursa Malaysia to revamp business rules
• Private property prices hit new high in Singapore • Bangkok moves on mass transport
• Thai retailers are upbeat
• Rice exports likely to decline • Vietnamese PM projects 10-year socioeconomic plan


This year in Thailand-what next?

AseanAffairs   04 January 2011
By David Swartzentruber      

It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

The first issue that can’t be answered is the health of Thailand’s beloved King Bhumibol, who is now 83 years old. He is the world's longest reigning monarch, but elaborate birthday celebrations in December failed to mask concern over his health. More






1.  Verifier

1. Verifier

For security purposes, we ask that you enter the security code that is shown in the graphic. Please enter the code exactly as it is shown in the graphic.
Your Code
Enter Code

Home | About Us | Contact Us | Special Feature | Features | News | Magazine | Events | TV | Press Release | Advertise With us

| Terms of Use | Site Map | Privacy Policy  | DISCLAIMER |

Version 5.0
Copyright © 2006-2020 TIME INTERNATIONAL MANAGEMENT ENTERPRISES CO., LTD. All rights reserved.
Bangkok, Thailand