Lao PDR Eyes Good Practices to Enhance Public Debt Management
VIENTIANE — The Asian Development Bank (ADB), in partnership with the Ministry of Finance of the Lao People’s Democratic Republic (Lao PDR), today opened the “High-Level Policy Dialogue on Good Practices for Enhancing Public Debt Management in the Lao PDR”. The 2-day event aims to discuss the interconnections between public debt and fiscal, monetary, and financial policies, with the view to help develop a whole-of-government approach to strengthen public debt management. Participants from governments, central banks, the private sector, research organizations, and development partners from across the region and beyond will share experiences and lessons on public financial management and debt sustainability.
“The high-level dialogue is very timely,” said Lao PDR Finance Minister and ADB Governor Santiphab Phomvihane during his keynote address. “Public debt in the Lao PDR has attracted not only the attention of many observers and stakeholders inside and outside the country, but also—and more importantly—because it is a core issue in the financing of the country’s current and future socioeconomic development.”
He said the high level of total public and publicly guaranteed (PPG) debt in the country, which reached 112% of gross domestic product (GDP) in 2022, had been made worse by the back-to-back shocks of the COVID-19 pandemic and rising global inflation. He added that the government has taken steps to reduce inflation and stabilize the exchange rate to help restore macroeconomic stability and sought ways to reduce the stock of outstanding PPG debt and exert tighter control on new public sector borrowing. He hopes that through discussions on the lessons and experiences of other countries faced with similar challenges, the high-level dialogue will help identify good practices which would be applicable to enhance public debt management in the Lao PDR.
“The government recognizes that the high level of public debt is an urgent concern that needs to be addressed,” said ADB Director General and Sectors Group Chief Ramesh Subramaniam. “The government has taken some important measures with a view to restore macroeconomic stability, but additional actions are necessary. In particular, defining a clear and transparent path to public debt sustainability will require a coordinated whole-of-government approach to increase financing and exert greater control over public borrowing to meet the country’s development needs and achieve the target to reduce poverty to less than 13.9% by 2025.”
While economic growth in Southeast Asia is expected to remain solid, risks to the outlook are rising. High interest rates have heightened the risk of financial instability and supply disruptions from geopolitical tensions continue, making it challenging to rebuild the fiscal space necessary to cope with any major shocks. Financing needs and debt ratios in many countries are likely to remain high for a long period.
Total external public debt accounted for three-quarters of total PPG debt in the Lao PDR in 2022, and it poses a special challenge because of the sharp depreciation of the kip against foreign currencies. However, in United States dollar terms, total external public debt has been approximately $10 billion over the last few years. Nevertheless, resolving the country’s debt challenges will require efforts across the government and from large creditors to make public financing practices more transparent and sustainable.
ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.