World Bank Recommends Fiscal Reforms to Address Laos’ Economic Challenge

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Laos Inflation Rate Hit 40.30 Percent in January
Woman holding a pile of LAK banknotes (photo: www.laostravel.indochinacharm.com/)

The World Bank urged Laos to take immediate steps to stabilize the national economy. With public debt exceeding 100 percent of GDP and a decline in revenue collection, the country confronts economic instability affecting vital sectors.

In a recent report, the World Bank underscored the pressing need to address the rapid devaluation of the Lao kip, citing fiscal challenges that hinder poverty reduction and inclusive development in Laos. The Fiscal Incidence Analysis conducted by the World Bank reveals that while income distribution improves post-taxes and government transfers, the impact on reducing poverty is constrained by poor revenue collection and low social spending.

Mariam Sherman, the World Bank Country Director for Myanmar, Cambodia, and Laos emphasized the transformative potential of proposed fiscal policy changes to not only tackle economic instability but also protect affected populations, stimulate growth, and reduce poverty and inequality.

Recognizing Laos’ fiscal challenges, Sherman remains hopeful, citing recently released reports that propose practical solutions for immediate benefits to the nation.

The proposed policies include enhancing tax collection, reforming the management of state-owned enterprises and public-private partnerships, targeting public spending more efficiently, and addressing the challenge of high public debt. These measures aim to increase government revenue, improve fiscal system equity, and ensure public funds are directed towards critical development areas.

The World Bank also stressed the importance of collaboration with Lao government institutions, specifically the Ministry of Finance and the Ministry of Planning and Investment.

As the nation grapples with economic challenges, the World Bank’s recommendations provide a roadmap for policymakers to navigate the complexities and work towards a  prosperous future for Laos.