Despite the tight budget, the Lao government has pledged to repay the debts owed to private companies in order to maintain the financial liquidity of these companies.
Laos Deputy Prime Minister and Minister of Finance Mr. Somdy said at a press conference held in Vientiane on June 27 that from the beginning of 2018 to the beginning of 2019, the Lao government’s debts owed to private enterprises more than 30 billion Kip have been transferred to commercial banks. Part of the government’s triangular debt transfer payment program. Once government debt is transferred to commercial banks, these companies will no longer have a burden and will be better able to apply for loans to continue to operate.
Mr. Somdy said that the Lao government allocates part of the budget every year to pay the debts owed to the company. “In 2019, we have allocated 400 billion Kip to pay off the debt owed to the company and are in the process of formulating a debt repayment plan for 2020. The Debt Clearing Committee is discussing other ways to solve the company’s debt to help it further develop its business.”
Debt repayments will be divided into different proportions, and companies can share the benefits of government debt repayment. This means that if a company with a large proportion of government debt will receive more repayments, companies with a smaller debt ratio will receive less repayment.
“This approach is fair to all companies. If priority is given to repaying only special companies, we will be accused by companies that have not received any repayments,” Mr. Somdy said.
After the Lao government hired private companies to invest in national investment projects such as roads and bridges, the government’s debt increased. Currently, public debt exceeds 60% of gross domestic product (GDP), but there is no official report on government debt owed to these
companies. The Laotian government acknowledges that it may take longer if the government continues to repay the debts owed to the company according to the national budget.
Mr. Somdy said that the delay in repaying debts by the Lao government will put a burden on the company, especially those companies that borrow large amounts of money from commercial banks because they must pay interest rates to banks on a regular basis.
Some people worry that if more national investment projects are completed this year and next year, the debt owed by the Lao government to the company will continue to increase. Economists say that the government’s delay in repaying debt will not only affect the company’s financial liquidity, but also affect the business of commercial banks.
At the same time, after the Lao government discovered the overvalued national investment projects of the past few years, the Prime Minister decided to set up a special subcommittee to review the completed project standards and reasonable construction costs. If it is found that the overvalued construction project will be reviewed and revised, the government can save more money or repay the company less debt.