Lao govt to allocate more funds to repay debts owed to companies

VIENTIANE (Vientiane Times/ANN) -The amount owed by the government to private enterprises has been put as high as 10.14 trillion kip, putting considerable pressure on the government to address this issue and sustain economic growth. 

Now the government has pledged to allocate more funds to repay its debts to private companies so they can maintain financial liquidity and expand their operations.

Minister of Planning and Investment Dr Souphanh Keomixay told the media recently that the government usually allocates 3 trillion kip annually for state-funded projects.

But the budget for 2020 will be adjusted to enable the repayment of debt as well as support ongoing state-funded projects and other essential development projects that are unlikely to result in direct economic returns.

Government bodies have been told to trim their administrative budgets to prevent the country from being dragged into further chronic debt distress.

Dr Souphanh said 2,091 state-funded projects had been completed, but the cost of construction amounting to 10.14 trillion kip remained unpaid.

In 2020, about 40 percent (1.2 trillion kip) of the money allocated for state investment expenditure will be used to repay debts owed to companies.

In addition, 1.4 trillion kip, equal to 47 percent of the state investment budget, will be disbursed to finance ongoing state-funded projects.

Another 100 billion kip of this investment budget will be spent as the government’s contribution to development projects funded through Official Development Assistance (ODA). 

The remaining 300 billion kip will be spent on strategically essential projects relating to rural development, poverty reduction and disaster recovery.

The government acknowledged that it could take longer if it continues to repay the debt owed to companies based on the national budget.

Deputy Prime Minister and Minister of Finance, Mr Somdy Duangdy, said the delayed payment of the government’s debts would place a burden on companies that had borrowed a lot of money from banks as they have to regularly pay interest and even the principal to banks.

There is concern that if many more state-funded projects are completed this year and next, the debt owed to the companies involved will continue to increase.

From the beginning of 2018 to the beginning of 2019, debt amounting to more than 3 trillion kip owed by the government to private enterprises was transferred to commercial banks.

This is a part of the government’s triangle debt diversion disbursement initiative in which the government transfers its debts from private companies to banks.

When the government’s debts are owed to banks, the companies will no longer be burdened and they will be in a better position to apply for new loans to expand their operations.

This enables them to generate job opportunities and help boost economic growth.

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