The government plans to lower the national budget deficit next fiscal year, hoping to increase its capacity to collect domestic revenue and cover public expenditure.

According to a draft prime ministerial decree on the implementation of the 2009-10 socio-economic development plan, the government expects to generate revenue of about 8,992 billion kip next fiscal year - a 7 percent increase – while its expenditure will be 10,800 billion kip, a 1.4 percent increase.

The move would take the national budget deficit to just 1,817 billion kip, down from about 2,300 billion kip this fiscal year.

F inancial analysts said the budget deficit for next year is lower partially due to unusually high expenditure in this financial year to prepare the country to host the SEA Games at the end of the year, which has resulted in mass construction of infrastructure projects such as new roads.

The higher government expenditure and borrowing in the current fiscal year is an attempt to create favourable short-term economic conditions that will generate more employment and income opportunities.

However excessive expenditure leads to a budget deficit which may have long-term impacts for the government as it will have to shoulder heavy debts, making it difficult to fight inflationary pressures.

Meanwhile, the government will have to borrow only 1,522 billion kip from international banks and foreign financial institutes next year, about five percent lower than this year's figure.

The government plans to issue bonds of 200 billion kip to raise funds, about a 150 percent increase.

The government also plans to use foreign aid grants of 85 billion kip to cover its budget deficit.

The budget data shows the government is increasing efforts to raise domestic revenue to 15 percent of GDP in accordance with advice from the Lao National Assembly. One of the main drivers of the 2009-10 national budget is still business taxes, which sees about a 3 percent increase.

The government is now evaluating business growth nationwide and will introduce a value added tax, which will see increase of consumption taxes from 5 to 10 percent on some goods.

The second budget driver is import taxes, estimated to be about 2,550 billion kip next year, a 12 percent increase over the previous year. The government plans to generate foreign aid projects of about 881 billion kip, up 50 percent.

The government plans to repay debt worth 988 billion kip next fiscal year to foreign financial institutes and 833 billion kip of debt to domestic contractors and local financial institutions.

According to the latest report from the Ministry of Finance, the government has paid off about 568 billion kip in foreign debt over the past eight months, about 72 percent of the annual plan.

The government has also paid off about 216 billion kip in domestic debt, about 28 percent of the annual plan.

By Ekaphone Phouthonesy
Vientianetimes