Laos’s foreign debt rose by 6.47 percent last year as the country continued to use foreign loans for development purposes.
According to the Bank of the Lao PDR’s annual report, outstanding foreign debt reached US$2.9 billion in December 2011, about 6.4 percent more compared to the previous year.
Multilateral debt accounted for 58 percent of total foreign debt while the rest was bilateral debt, accounting for 42 percent.
The report, which was made available to the Vientiane Times this week, shows Laos’ foreign debt has risen since 2009 after seeing a 10 percent drop in 2008. The figure rose by 4.63 percent in 2009 and 4.24 percent in 2010.
Foreign debt saw a major increase in 2006 and 2007, with rises of 11.85 percent and 15.46 percent respectively, the report noted.
Despite the continuing increase in foreign debt, pressure on the government to manage the situation is easing as the rate of GDP growth continues to rise.
Compared to GDP, foreign debt has declined over the past five years from 71.21 percent of GDP in 2006, 57.70 percent in 2007, 48.50 percent in 2008, 48.15 percent in 2009, 43.82 percent in 2010, and 38.52 percent of GDP in 2011.
In the past five years the economy has seen GDP growth rise above 7.5 percent. Lao GDP is now on track to reach 70,600 billion (US$8.8 billion) this fiscal year and is expected to reach 80,720 billion kip (US$10.1 billion) next fiscal year. Economists say government debt should not be higher than the rate of GDP growth, otherwise it will be difficult to pay off the debt. They said a low debt value compared to GDP would create confidence in investors concerning economic stability.
Finance Minister Mr Phouphet Khamphounvong said at the end of last month the government would borrow 1,742 billion kip (US$218 million) from foreign countries to carry out development projects in fiscal year 2012/13.
Mr Phouphet said the budget deficit next fiscal year would be 4.67 percent of GDP. He admitted that the deficit was larger than in the past but was optimistic that the government can remedy the situation as the deficit remains below 5 percent of GDP.
National Assembly members have expressed concern over the rising budget deficit and urged the sectors concerned to introduce concrete measures to ward off any negative impacts.
