Laos’ Finance Minister Bounchom Oubonpaseuth has assured National Assembly members that public debt is still manageable, despite the total amount remaining considerable.
Vientiane Times reports that National Assembly (NA) members have expressed concern over rising public debt against a backdrop of steep depreciation of the local currency, rising inflation, and economic vulnerabilities caused by the war in Ukraine.
When it comes to the public debt, “the government can assure you that management is at a high degree of safety,” Mr. Bounchom told parliament last week.
“We will not allow our country to slide into default,” he said.
Public debt levels have increased considerably since 2019, increasing to 88 percent of GDP in 2021, with the energy sector accounting for over 30 percent of the debt stock, according to the World Bank.
The country had been hoping to pay off large amounts of its massive debt by 2025 through revenue earned from mining operations and reformed state enterprises.
During his speech at the National Assembly session, Finance Minister Bounchom said that the government has sufficient funds to repay debts until August this year.
The government has sold bonds to help pay off domestic obligations and is negotiating with foreign creditors to extend repayment terms for debts due beyond August.
KPL reports that while a budget was approved by the National Assembly to repay domestic and foreign debts amounting to LAK 7,157 billion and USD 1.598 billion this year, by May only LAK 1,619 billion in domestic debt had been paid, accounting for just 24.53 percent of the target.
At the same time, only USD 137.90 million of planned foreign debt repayments had been made, accounting for only 8.62 percent of the target.
Minister Bounchom explained these small amounts by saying that the majority of debts were not due until the third and fourth quarters of this year.
He said that the sale of government bonds had netted the government some LAK 9,577 billion, which should help the government more easily reach its debt-repayment target.
He also stated that the budget deficit would not exceed LAK 3,098.28 billion, accounting for 1.61 percent of GDP.
The finance minister said that the government is collecting extra revenue from mining projects, the sale of cryptocurrency, as well as service charges from the transport of freight via the Laos-China Railway.
He said that two state banks have made millions in profit following the sale of 70 percent of shares to local investors, with more state enterprises to undergo reform.