Lao People's Democratic Republic: An Illustrative Fiscal Strategy Consistent with the Seventh National Socio-Economic Development Plan
This report discusses some of the technical issues involved in formulating a multi-annual fiscal strategy for the Lao People’s Democratic Republic.
This report describes an illustrative multi-annual fiscal strategy for the Government of the Lao People's Democratic Republic (Lao PDR) covering fiscal years FY2011-FY2020, corresponding to the present Seventh National Socio-Economic Development Plan (NSEDP7), FY2011-FY2015 and a putative Eighth National Socio-Economic Development Plans (NSEDP8), FY2016-FY2020.
A fiscal strategy is a financially feasible fiscal program to attain national development, poverty reduction, and public service objectives, while maintaining financial soundness. The strategy the paper describes is illustrative because its assumptions have not been discussed with, much less adopted by, government policy makers. The purpose of the paper is to suggest that the government consider formulating a strategy of this type, and to characterize the kinds of assumptions and projection techniques that it could use. In this sense, the strategy set out here is simply a large numerical example.
The paper's overall recommendation is that the government could improve its ability to meet its national development goals and enhance the quality of its financial management by developing and maintaining the kind of multi-annual fiscal strategy this paper describes. By preparing new versions of the strategy along with each year's annual budget, government analysts can help ensure that the expenditure program will address longer-term national objectives while remaining financially feasible. By disseminating each year's multi-annual fiscal strategy, the government should be able to strengthen stakeholders' confidence that the government can and will carry out its programmed policy and expenditure.
Although the Lao PDR has maintained its overall fiscal accounts relatively conservatively, it is important to remember that these favorable results have come about in large part through the economy's rapid growth. If growth were to slow, fiscal management could require the authorities to make more difficult policy choices. In addition, analysis of the past decade's fiscal data reveals trends that need to be taken into account in formulating a medium-term fiscal strategy, particularly as the Lao PDR commences the relatively ambitious NSEDP7.
The difference between tax and nontax revenue and current expenditure, the government savings flow, has been declining. This has been basically because current expenditure has been rising faster than revenue.
- Executive Summary
- Introduction: Definition and Purposes of a Multi-Annual Fiscal Strategy
- Methodology: Formulating a Fiscal Strategy for an Economy with a National Investment Program
- Background: The Lao PDR's Recent Fiscal Performance
- A Projection Exercise for the Lao PDR's Government Accounts
- An Illustrative Fiscal Strategy for the Lao PDR