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Strengthening Public Financial Management

Remarks by
Gil-Hong Kim
Country Director
Lao PDR Resident Mission
Asian Development Bank

At the Occasion of the Signing Ceremony of the TA - Lao People's Democratic Republic

6 August 2008
Lao PDR

H.E., Madam Viengthong and colleagues,

First let me take this opportunity to congratulate the Government on another milestone in our partnership in the financial sector. I must complement the Government for making significant progress on reforms across various aspects in the financial sector.

While there are still many challenges ahead for the country to meet its development objectives, the Government has made progress in advancing the Public Financial Management (PFM) development agenda since 2002 under the PEMSP. Progress in PFM reform has been impressive. This has resulted in increased revenue collection, as well as the strengthening of the tax, customs and treasury administration which has helped the Government to exceeded its revenue targets for a second consecutive year.

A sound PFM framework has been put in place under the Budget Law and has expanded to include reforms on the revenue side as well. The Government has successfully piloted centralizing the customs, tax and treasury departments and has embarked upon the challenging task of developing a new revenue sharing framework for strengthening inter-fiscal framework.

Excellency, you would appreciate that ADB has a long relationship with the Government in the area of PFM. From 1998 to 2006, ADB had consistently supported capacity building in the Ministry of Finance (MOF) Dept of Accounting in (i) developing and implementing an improved set of government accounting regulations; (ii) developing and implementing a database management system within the MOF (the Government Financial Information System, [GFIS]) which processes and stores all information related to revenue and recurrent expenditures; and (iii) implementing the GFIS and the regulations on a nationwide scale across 40 line ministries and government agencies and 17 provincial offices. The GFIS is an important outcome in the PFM reform.

Excellency, ADB has extended the support to PFM totaling about $2.5 million over the past 7 years. ADB also supported the Department of Accounting and the State Audit Office.

Excellency, as you know, while developing the NT2 project, ADB also assisted the Government in its budget formulation process and assisted in developing and pilot testing medium-term fiscal and expenditure frameworks (MTFF/MTEF). The TA, which was completed at the end of December 2007, provided advice to the MOF's Fiscal Policy Department, specifically on inter-governmental fiscal transfers, which enabled the passing of the enhanced Budget Law in December 2006.

This TA for $1.1 million will extend the work on MTFF/MTEF. It will help draft the implementing decrees to the Budget Law.

This will build upon the foundations already established by earlier TA support and will assist the MOF in piloting the design and implementation of the MTEF process in priority sectors. We hope this will build capacities for strategic budget planning, matching policies, and programs with available resources, with an eye towards optimizing strategic poverty reducing allocations.

In the months ahead, we will seek the Government cooperation in organizing a high level open forum for policy dialogue that would discuss contemporary PFM issues.

Finally, I would like to wish the Ministry of Finance successfully all the very best and success in the implementation of this TA.

Thank you