Journal Issue
Share
Article

Lao People’s Democratic Republic: Selected Issues and Statistical Appendix

Author(s):
International Monetary Fund
Published Date:
November 2007
Share
  • ShareShare
Show Summary Details

II. Managing Resource Revenues in Lao P.D.R1

A. Introduction

1. The emerging resource sector poses significant challenges to the design and management of fiscal policy in Lao P.D.R.

  • In Lao P.D.R, as in many resource-rich countries, the government is the most important domestic recipient of the revenues generated by the sector through taxation and equity participation.

  • Large resource projects are usually very intensive in the use of capital (not produced domestically) and require sizable investments funded by foreign direct investment. As a result, a significant portion of resource revenues flows out of the country in the form of imports, debt service, and dividends, with little direct impact on the domestic non-resource sector or labor market.

  • As resource revenues accruing to the budget grow rapidly and become more important relative to non-resource revenues, the government will confront three major challenges. It will need to ensure that resource revenues are maximized and used effectively in support of growth and poverty reduction, while achieving the government’s medium-term objectives of fiscal consolidation and debt sustainability.

  • The experience of other resource-rich low-income countries indicates that meeting these challenges requires the development of an appropriate fiscal regime for managing resource revenues that is fully integrated into a medium-term fiscal framework.2

2. This chapter discusses the main challenges faced by the Lao P.D.R. authorities in managing resource revenues. It also makes a preliminary assessment of the existing fiscal regime against international best practices and discusses key features of a fiscal framework to manage resource revenues.3 The paper focuses only on revenues from copper, gold, and hydropower, because these commodities will be the most important sources of resource fiscal revenues in the years to come.4

B. Overview of Recent Fiscal Developments

3. Fiscal revenues have risen in recent years, increasingly driven by resource revenues. In the last four years, total revenues increased by 1¾ percentage points of GDP to 12¾ percent of GDP in 2005/06, with more than half of the increase accounted for by resource revenues.5 The share of resource revenues in total revenues rose to nearly 10 percent in 2005/06, while the contribution of resource revenue reached about one third of total real revenue growth, reflecting higher commodity prices and expansion in production. This trend is expected to continue in 2006/07.

Revenue Performance

Sources: Lao P.D.R. authorities; and IMF staff calculations.

Revenue Growth

(Contribution to constant price revenue growth; percent)

Sources: Lao P.D.R. authorities; and IMF staff calculations.

4. With increased revenues and a prudent spending policy, the fiscal position has strengthened. The overall deficit is expected to decline to 1¼ percent of GDP in 2006/07 from 5½ percent of GDP in 2002/03, while the non-resource deficit is projected to decline to 3½ percent of GDP from 6 percent of GDP. As a result, the government is expected to accumulate net deposits in the banking system of 1¼ percent of GDP, which is equivalent to “saving” half of the resource revenues generated during the period. This outcome, however, reflects the fact that the government underestimated the rapid increase in resource revenues, resulting in an ex-post saving of a large portion of them, rather than an ex-ante decision to save within a medium-term fiscal (MTF) framework.

Fiscal Balance and Domestic Financing

(In percent of GDP)

Sources: Lao P.D.R. authorities; and IMF staff calculations.

5. As resource revenues have kept rising, so have spending pressures. The 2007/08 budget envisages an increase in both the overall and non resource deficits, driven by higher recurrent expenditures, including wages, allowances, and transfers. The budget implies nearly a full utilization of the annual resource revenues, and it does not have an explicit contingency reserve to protect the spending plan from adverse movements in commodity prices. This expansionary fiscal stance, if fully implemented, would represent a departure from the recent path of prudence and does not appear to be fully consistent with the government’s medium-term fiscal objectives.

Overall and Domestic Balance

(In percent of GDP)

Sources: Lao P.D.R. authorities; and IMF staff calculations.

1/ Defined as overall balance net of grants and externally financed capital expenditures.

Resource Revenue Spending

(In percent of GDP)

Sources: Lao P.D.R. authorities; and IMF staff calculations.

6. On the financing front, Lao P.D.R. has invited private sector participation in resource sector developments, and has thus far contained its financial exposure to these projects (Box 1). The large mining projects are privately owned, but the government has the option to acquire some equity to be paid out for future dividends. The NT2 project is being developed using a public private partnership framework, with the government taking an equity stake of 25 percent funded largely through donor concessional grants and loans. Equity participation in the second biggest hydropower project (Nam Ngum 2) has been set at 25 percent and the government is planning to issue commercial bonds to pay for it. A number of future projects have a provision for government’s equity participation (Table 1), although it remains unclear whether the authorities intend to avail themselves of this option.

Table 1.Seven Large Projects Coming on Stream by Mid 2010s
Dam nameInstalled

capacity
ProductionCostGov’t equity

stake
MWGWh / yearMillion $Percent
Nam Theun 21,0805,9361,4500.25
Xeset 2762271380.25
Nam Ngum 261523107710.25
Xe Kaman 32509702780.25
Theun Hinboun Expansion210518.32880.30
Nam Ngum 34601,9196300.23
Nam Ngiep 12521,2743400.25
Total2,94313,1543,895

Box 1.Resource Projects: Financing Structure

Large mining projects have been developed fully by the private sector. Two existing large mining concessions, Lane Xang Minerals Ltd. (LXML) and Phu Bia Mining Ltd., were fully owned by subsidiaries of Australian companies. The projects were financed by parent companies’ equity and loans. The concessional agreements gave the government an option to acquire up to 10 percent of the shares, and the government has recently decided to exercise this option with LXML.

Large hydro dam projects are being developed with a mixture of private and public funds.

  • The total project cost for Nam Theun 2 (NT2) hydro dam is estimated at $1.5 billion. The shareholders contribute $0.5 billion to the project. The government holds about 25 percent of the equity, funded by loans and grants. The remaining $1 billon have been secured through debt financing from official creditors and international banks. IDA, MIGA, and ADB provide partial risk guarantees for international lenders.

  • The Nam Ngeum 2 (NN2) project (estimated cost, $770 million) is expected to adopt a similar financing structure, with about 30 percent of the cost covered by equity and the remaining 70 percent by commercial loans. Electricite du Laos, on behalf of the government, will hold about 25 percent of total equity shares. However, with no concessional funding available, the government is planning to issue commercial bonds with guarantee of Thai Exim bank (about $45 million) to pay for its equity contribution.

Financing structure of Nam Theun 2(In millions of U.S. dollars)
Project Cost1,450
Base cost1,250
Contingency200
Financing1,450
Equity450
Private338
Eletricite de France International
158
Electricity Generating Public
Company Ltd113
Italian-Thai Development Public
company68
Government (NTPC)112
Debt1,000
Official creditors160
International Banks340
Thai commercial banks (THB loans)500
Source: World Bank.

Dollar amounts are approximate due to exchange rate

Source: World Bank.

Dollar amounts are approximate due to exchange rate

C. Challenges in Managing Resource Revenues 6

7. The first challenge lies with uncertainties associated with resource revenues, particularly in the case of minerals.

  • Mineral revenues are not only finite but also highly volatile and uncertain. The remaining life of the two largest mines currently in production is estimated at 10-15 years, but these estimates are highly uncertain. Available geological mapping and survey information suggests that the mineral resource potential in Lao P.D.R. is quite high (Table 2 and Marutani, 2006), but adding to proven reserves and developing new mines take time and require additional investment. Mineral prices have been very favorable in recent years, but their volatility has increased. Between 2002 and 2006, average copper prices increased by more than 330 percent, while gold prices nearly doubled. At the same time, price volatility (calculated as dividing the standard deviation of monthly commodity prices for five-year rolling periods by their mean) has risen to 60 percent for copper and 25 percent for gold.

Table 2.Inventory of Gold and Copper Resources
ReservesPotentialComments
Gold (in ton)72.0500-600
Of which: Sepon48.8...Lang Xang Minerals (Oxiana Ltd., Australia), started in 2002
Phu Bia16.9...Phu Bia Mining (Pan Australian, Australia), started in 2005
Copper (in million ton)1.78-10
Of which: Sepon0.8...Lang Xang Minerals (Oxiana Ltd., Australia), started in 2005
Phu Kham0.8...Phu Bia Mining (Pan Australian, Australia), expected in 2008
Sources: Marutani (2006).
Sources: Marutani (2006).

Commodity Prices

(2002 January =100)

Sources: IMF commodity Price System; and IMF staff calculations.

1/ Grade A cathode, LME spot price.

2/ Fixing Committee of the London Bulletin Market Association.

Volatility in Commodity Prices

(Coefficient of variation; five-year rolling standard deviation/mean; in percent)

Sources: IMF commodity Price System; and IMF staff calculations.

  • Hydropower resources are generally considered as a more stable and certain source of revenue. However, they are subject to other risks, such as changes in hydrological conditions and delays in project development and construction. The NT2 project will be protected from electricity demand and price risks by long-term power purchase agreements (PPA), such as with Electricity Generating Authority of Thailand (a main off-taker), and hydrological risks are not regarded as a immediate concern for this project.7 However, for some of the other hydropower projects, PPAs have not been fully finalized, and the extent of the government’s exposure to demand and price risks remains uncertain. Moreover, in the long run, severe drought, possibly caused by a global climate change, could adversely affect hydropower generation capacity, and ultimately revenues for the government.

8. A second challenge is to ensure a proper utilization of resource revenues over time.

  • Many low-income countries face significant immediate spending pressures, particularly given the substantial human and physical capital development needs, and Lao P.D.R. is not an exception.

  • Using resource revenues effectively will require adequate institutions and capacity to monitor the quality of spending. Indications are that Lao P.D.R. needs to strengthen these areas, including public expenditure management, and until such institutional capacity develops, any increase in spending should be cautious and focused on the provision of high-priority public goods only.

Spending Needs and Capacity in Regional Resource-Rich Low-Income Countries
CountriesLow-Income Countries
Lao P.D.RBruneiIndonesiaMalaysiaMongoliaPapua

New Guinea
Timor-

Leste
VietnamAsia

Average 1/
Indicators of human and physical capital
Public infrastructure quality (most recent year)
Paved roads (percent of total roads)14.134.758.077.93.53.5Poor25.158.4
Water quality (percent of population with access)30.0...55.094.059.044.036.061.058.3
Human capital quality Index
Adult literacy rate (percent of ages 15 and over)68.792.790.488.797.857.358.690.387.9
Life expectancy at birth (years)55.176.667.273.464.555.756.070.872.1
Indicators of country capacity to spend2
Government effectiveness-1.10.6-0.51.0-0.4-1.0-1.0-0.30.6
Rule of law-1.10.5-0.90.6-0.3-0.9-0.5-0.40.3
Political stability-0.31.1-1.40.50.9-0.8-0.70.3-0.2
Sources: World Bank, World Development Indicators; and Kaufamm, Krayy and Mastruzzi (2005).

Coverage varies depending on data availability.

Governance indicators (government effectiveness, rule of law, and political stability) are measured in units ranging from about -2.5 to 2.5, with higher values corresponding to better governance outcomes.

Sources: World Bank, World Development Indicators; and Kaufamm, Krayy and Mastruzzi (2005).

Coverage varies depending on data availability.

Governance indicators (government effectiveness, rule of law, and political stability) are measured in units ranging from about -2.5 to 2.5, with higher values corresponding to better governance outcomes.

  • The uncertainty surrounding resource revenues in general, and the finite nature of mineral revenues in particular, also argue in favor of a prudent use of such resources. It also underscores the need for making spending decisions on the basis of a medium term fiscal framework to take account of intergenerational considerations.

9. Large financing needs arise in developing resource projects. Accordingly, resource projects in a low-income country are often developed using public-private partnerships (PPP) framework. However, PPPs could entail several financial risks, unless a sound institutional framework is in place for managing PPPs. In particular, whether the government takes equity stake in resource projects would warrant careful considerations, because direct participation could become costly given the financial risks associated to resource sector activities and the potential for a conflict of interest between the government’s dual roles as regulator and as shareholder.

D. Key Features of a Fiscal Framework to Manage Resource Revenues

10. A sound and transparent fiscal regime should maximize the resource revenues accruing to the government, while an MTF fiscal framework should help ensure their appropriate use over time. The current mining and hydropower fiscal regimes of Lao P.D.R. have a number of desirable features that are in line with international best practices, but they could benefit from greater simplicity and transparency. The government has reduced its net domestic borrowing by “saving” an important proportion of resource revenues, but such outcome has not reflected ex-ante spending decisions taken in the context of an MTF framework.8

Maximizing resource revenues

11. Lao P.D.R.’s current resource fiscal regime is complex and lacks transparency (Box 2). The existing fiscal regimes combine royalties, income taxation, and equity participation. The terms applicable have been negotiated on a case-by-case basis, and have not been fully disclosed.9 As a result, there is a proliferation of fiscal regimes that could have adverse consequences for revenue administration, risk hampering investors’ interest, and give rise to governance concerns.

12. A properly designed resource fiscal regime should strike the right balance between capturing an appropriate share of rents for the government and nurturing investors’ interest.

  • Standardizing all taxation terms across projects in each resource sub-sector and stipulating them in tax laws and regulations should facilitate tax compliance and administration, while providing a level playing field, and helping to improve investor confidence.

  • In maximizing rents, there are two important trade offs that need to be considered: one is between a regime based purely on taxation versus one that in addition has equity participation (dividends), and the other is among the various tax instruments that could be used and their impact upon investors’ interest. It would be possible to design a tax system that would generate a present value of an income stream equivalent to the one that would be obtained through dividends. However, if the government has minority participation and limited expertise, it will have marginal influence in establishing the dividend payment policy and difficulties in contesting technical arguments for retaining profits. A careful assessment of the pros and cons of equity participation is warranted. As regards the choice of taxation instruments, the principle should be that the regime chosen should help capture the rents as the profitability of the projects increases without hampering investors’ interest (Box 3).10

Box 2.Resource Taxation

Broad framework: Both the mining and hydropower sector are subject to a combination of royalties, corporate income tax, and state equity. The fiscal terms are negotiated concession by concession.

Mining Sector

Royalties: the rate is based on sale value and varies from 2 to 6 percent, depending on the type of mineral. A sliding scale royalty has recently been introduced in one concession to better capture price-induced windfall gains.

Corporate income tax: varies from 25 percent to 33 percent depending on the concession, and may or may not include tax holidays. The tax base is determined according to the general tax law, which does not contain any provisions specific to the mining sector.

State participation: The government has been given the option to purchase up to 10 percent of equity, which is calculated based on historical costs, once commercial development has been established. The state equity will be paid out of dividends. The government has exercised this option with LXML recently.

Hydropower

Royalties and income tax: the applicable rates vary by concession. Royalty rates typically start at 5 percent, while a tax holiday typically applies to income taxes during first years of operation. Thereafter the tax rate structure generally reflects the results of the project feasibility study (such as the amount of costs and investments, as well as construction and operation periods), financing arrangements, levels of tariffs, and the investor’s required return. Both royalty and tax rates increase with the years of operation, with larger increases envisaged after the investment cost has been recovered.

State participation: The two largest concessions include equity participation rates of 25 and 30 percent, but the options for the future range from 15 percent to 25 percent. The government has paid the 25 percent participation in NT2 with grants and concessional funding but it intends to borrow commercially to pay for the 25 percent already agreed for NN2.

Box 3.Impact of Selected Tax and Nontax Instruments

  • Royalties can bring revenues to the government as soon as production starts and are easier to administer than many other instruments. However, royalties could be costly for investors if set at too high a level.

  • Corporate income tax would create fewer distortions than royalties and allow the government to capture more upside risks from rising prices, but are more complex to administer and prone to transfer pricing.

  • Resource rent tax—a cash-flow-based tax imposed once the investor earned a certain rate of return—can be uniformly applied to all types of resource activities without considering the nature of different resource activities. The resource rent tax can properly capture a share of the resource rent (the return over and above the company’s opportunity cost of capital). However, the revenue stream for the government is back-loaded, and for less profitable projects, the government may not generate any revenue.

  • State equity is highly risky and costly, particularly if the government needs to commercially borrow to purchase equity. This option would also have non-economic implications, such as possible conflicts arising from the government’s role as regulator, and an equity holder, especially if a strong and independent regulatory system does not exist.

Resource revenue utilization

13. Given the uncertainty of resource revenues, decisions concerning their use need to be consistent with achieving medium-term fiscal sustainability. To this end, such decisions should be made in the context of an MTF framework that allows the government to assess fiscal sustainability in a forward looking manner. By framing annual budget plans in an MTF framework that takes into account a potentially volatile resource revenue stream, the expenditure path can be smoothed and sheltered from unexpected changes in resource revenues. A prudent use of resources also provides the flexibility required to confront shocks that may destabilize aggregate demand and cause inefficiency in capital spending, such as having to stop project executions suddenly due to shortfalls in resource revenues caused by adverse commodity price shocks. Furthermore, the MTF framework should include options to mitigate risks due to high dependence on resource revenues, including the accumulation of net financial assets.

14. In designing an MTF framework, policymakers need to have an ex-ante view regarding the amount of resource revenues they should save. Several considerations should enter into such a decision (illustrative alternative fiscal spending approaches are presented in Annex 1).11

  • Front-loaded spending approach will directly affect aggregate demand, and unless there is a slack in labor and product markets, the demand stimulus could put upward pressures on inflation and thereby the real exchange rate. On the other hand, a front-loaded spending approach would be desirable, if there is a substantial development gap. Empirical studies generally support that larger spending in social areas (such as education and health) helps enhance economic growth.12 However, main constraints would be that it would take certain time to plan and develop a cost effective expenditure program and strengthen public expenditure management capacity.

  • The larger the savings are, the greater the ability of the government would be to confront shocks without recourse to borrowing to sustain a particular level of expenditure. This is particularly relevant for countries with a high level of debt, such as Lao P.D.R.

  • To the extent that the resource sector is largely separate from the rest of the economy, the non-resource balance should become a more important fiscal indicator to gauge fiscal pressures on aggregate demand.13 The overall balance remains an important fiscal target, but more as a measure of financing needs.

  • Finally, because the resources will eventually be exhausted, intergenerational equity considerations require a long run policy perspective.

E. Final Remarks

15. Rising resource revenues pose several challenges to Lao P.D.R. in fiscal policy formulation. Enhancing transparency in fiscal regime and developing MTF framework would help the authorities handle these challenges. In this regard, participation in the global Extractive Industries Transparency Initiative and IMF’s Fiscal Transparency Report on the Observance of Standards and Codes will be highly desirable to improve transparency.

Annex I. Illustrative Alternative Fiscal Spending Approaches

Prudent spending14

  • Key assumptions. To maintain macroeconomic stability by containing aggregate demand pressures, the government will smooth spending and aim at a gradual improvement in non-resource balance. This will allow the government to save a large portion of resource revenues (about 50 percent) and deposit them in a (hypothetical) resource fund. 15 Government deposits will yield a 4 percent interest return to the government a year.

  • This scenario shows that as resource revenues start declining, the government will be required to make fiscal adjustments—non-resource domestic fiscal balance will improve from minus ½ percent of GDP in 2006/07 to positive ½ percent of GDP by 2015/16.16 However, the required size of adjustments would be very small, only by 1 percent of GDP in 10 years. This reflects that prudent spending stance at times of rising resource revenue would allow the government to accumulate financial assets, and at later stages, a resource revenue loss will be offset by an increase in interest income.

Resource Revenue, Financial Income, and Stock of Financial Saving

(In millions of U.S. dollar; unless otherwise indicated)

Sources: IMF staff calculations.

Domestic and Non-Resource Domestic Balance:Prudent Spending Case

(In percent of GDP)

Sources: Lao P.D.R. authorities; and IMF staff calculations.

  • With adequate buffer built in the budget framework (50 percent of resource revenues saved every year), fiscal operations would be shielded from resource revenue shocks. As long as the size of an unexpected resource revenue shortfall is below 50 percent of projected resource revenues, the government can avoid recourse to domestic financing, while being able to adhere to a planned expenditure path.

Full spending17

  • Key assumptions. The government spends all resource revenues and does not save anything. The main fiscal policy target is maintaining domestic financing at zero.

  • The simulation results show that initially, the government will be able to run a much larger non-resource domestic deficit (about 2 percent of non-resource GDP). However, once resource revenues start declining, the government is required to make a large fiscal adjustment. Between 2008/09 and 2015/16, the government must cut spending by 2 ½ percent of GDP: in other words, non-resource domestic balance should be improved from -2 percent of GDP to ½ percent of GDP.

Domestic and Non-Resource Domestic balance (Full Spending Case)

(In percent of GDP)

Sources: IMF staff calculations.

  • This spending approach also highlights risks of excessive aggregate fluctuations driven by fiscal policy. As an illustration, a random shock of ± 40 percent (per year) of resource revenue fluctuation is given to the resource revenue path. This results in a highly volatile non-resource domestic balance path (dot line in the figure). For example, spending should be cut by ½ percentage point of non-resource GDP in 2011/12, followed by a spending expansion of about 1 percentage point of GDP in 2012/13. Such volatile spending policy is not only costly but also could lead to aggregate demand fluctuations of the whole economy.

Table 1.Lao P.D.R.: Real GDP by Industrial Origin, 2000–06(In billions of kip; at 1990 constant market prices)
2000200120022003 1/2004 1/2005 1/2006 1/

Est.
Agriculture584606630644666682702
Crops347361373373388398408
Livestock and fishery202207217227234238245
Forestry35384043444649
Industry254280308344387449525
Mining and quarrying56622214788
Manufacturing189212239254289315340
Construction25292730384596
Electricity, gas, and water353436373941...
Services281297314337363387415
Transportation, storage, and communication657177849296103
Wholesale and retail trade105114123136149160173
Banking, insurance, and real estate91056566
Ownership of dwellings33343536373839
Public wage bill33343940414142
Nonprofit institutions98889910
Hotels and restaurants25252624283540
Other2222333
GDP at factor cost1,1191,1831,2531,3241,4151,5181,642
Import duties891011131416
GDP at market prices1,1271,1921,2631,3351,4281,5321,659
Source: Data provided by the Lao P.D.R. authorities.

Differ from Fund staff estimates.

Source: Data provided by the Lao P.D.R. authorities.

Differ from Fund staff estimates.

Table 2.Lao P.D.R.: Real GDP Growth, 2000–06(In percent)
2000

Weights
2000200120022003 1/2004 1/2005 1/2006 1/

Est.
Agriculture52.14.93.84.02.23.52.52.9
Crops31.013.24.13.50.04.02.52.6
Livestock and fishery18.12.32.54.64.93.01.82.8
Forestry3.1-33.68.15.18.61.35.56.4
Industry22.78.510.110.111.512.516.017.0
Mining and quarrying0.51.41.210.1267.5-5.1121.486.7
Manufacturing16.97.212.113.06.313.79.08.0
Construction2.3-9.213.0-6.512.924.619.4114.4
Electricity, gas, and water3.139.0-1.36.31.25.36.4...
Services25.24.95.75.77.27.56.77.3
Transportation, storage, and communication5.89.08.68.49.39.54.87.5
Wholesale and retail trade9.45.08.97.510.79.27.48.4
Banking, insurance, and real estate0.8-35.712.7-46.314.0-24.022.216.0
Ownership of dwellings3.02.52.52.52.52.52.52.3
Public wage bill3.07.11.615.03.41.01.01.0
Nonprofit institutions0.87.5-12.54.27.07.42.92.5
Hotels and restaurants2.316.5-1.22.7-5.016.522.015.1
Other2.328.9-1.52.68.716.17.87.5
GDP at factor cost100.05.75.75.95.76.97.38.2
Import duties0.720.415.812.68.914.511.115.0
GDP at market prices100.75.85.85.95.86.97.38.3
Source: Data provided by the Lao P.D.R. authorities.

Differ from Fund staff estimates.

Source: Data provided by the Lao P.D.R. authorities.

Differ from Fund staff estimates.

Table 3.Lao P.D.R.: Nominal GDP by Industrial Origin, 2000–05(In billions of kip)
2000200120022003 1/2004 1/2005 1/

Est.
Agriculture7,1277,9759,17410,82912,37813,593
Crops4,2334,7505,4396,2807,2167,929
Livestock and fishery2,4682,7273,1563,8244,3504,747
Forestry427497578725811917
Industry3,1063,6874,4925,7837,1908,937
Mining and quarrying677389378397941
Manufacturing2,3062,7873,4834,2775,3736,278
Construction309377390508700896
Electricity, gas, and water423450530619720822
Services3,3303,8994,5545,7036,7857,800
Transportation, storage, and communication7949301,1151,4081,7031,913
Wholesale and retail trade1,2841,5071,7922,2922,7643,180
Banking, insurance, and real estate10512876100842,017
Ownership of dwellings406449509603682110
Public wage bill393517643822957750
Nonprofit institutions12111215151,083
Hotels and restaurants30932937442352815
Other2628324151691
Import duties107141182211237269
GDP at market prices13,66915,70218,40122,52526,59030,600
Source: Data provided by the Lao P.D.R. authorities.

Differ from Fund staff estimates.

Source: Data provided by the Lao P.D.R. authorities.

Differ from Fund staff estimates.

Table 4.Lao P.D.R.: Output of Major Commodities, 2000–05
Unit200020012002200320042005

Est.
Agriculture
Paddythousand tons2,2302,3352,4172,3752,5292,704
Cornthousand tons117111124143204...
Sweet potatoes and cassavathousand tons52101111150175...
Coffeethousand tons255631633663671...
Tobaccothousand tons1826322223...
Livestock
Buffalothousand heads1,0071,0521,0911,1131,1121,096
Cattlethousand heads9871,2181,2091,2451,2491,272
Pigsthousand heads1,1011,4271,4161,6551,7281,826
Goats and sheepthousand heads100123126138139...
Poultrythousand heads12,02814,06515,27519,47519,48119,801
Forestry
Logsthousand m3378239............
Industry
Tintons800816......1,250900
Gypsumthousand tons1851509998236220
GoldKg.........8,9007,000...
Manufacturing
Hydropowermillion kwh3,6783,5903,6033,1793,3473,430
Beerthousand hectoliter508577652702827885
Soft drinksthousand hectoliter143142148164187194
Cigarettesmillion packs414155688482
Agricultural toolsthousand units444444
Detergenttons900700700710860700
Nailstons6507407457609001,000
Oxygenthousand bottles212121212323
Electric cordthousand m2,000...............
Plastic productstons3,8504,3504,4204,5305,5006,500
Saltthousand tons192122222526
Wood furnituremillion kip12,70015,24015,35015,550......
Rattan furnituremillion kip275320345350430450
Garmentsmillion pieces243233343738
Sugartons300265562450......
Tobaccothousand tons1,1003585939471,8972,800
Plywoodmillion sheets2,1002,2002,2501,5501,3002,000
Cementthousand tons7575263280282320
Bricksmillion pieces66878990120100
Woodthousand meters240230235198......
Ventilatorsthousand pieces400465320330340350
Source: Data provided by the Lao P.D.R. authorities.
Source: Data provided by the Lao P.D.R. authorities.
Table 5.Lao P.D.R.: Consumer Price Indices, 2001–07
2001200220032004200520062007
(NSC Index; December 2005 = 100)
January61.365.775.885.492.299.7105.2
February61.866.276.686.592.6100.5105.4
March62.066.478.387.793.3101.0105.7
April63.067.679.789.294.9102.8106.5
May63.868.080.490.495.8103.4107.0
June63.769.581.191.396.3104.1107.7
July64.471.682.392.397.2104.7...
August65.874.185.193.099.1105.9...
September66.375.986.993.3100.5106.0...
October66.375.886.792.5101.3105.0...
November65.775.085.292.1100.2104.6...
December65.275.184.691.9100.0104.7...
(Twelve-month percentage change)
January10.17.215.412.68.08.15.5
February9.07.215.612.97.08.64.9
March8.57.217.911.96.58.24.7
April7.87.417.811.96.48.33.6
May7.96.718.212.46.08.03.4
June6.79.116.712.65.58.13.5
July6.911.215.012.15.47.7...
August8.112.614.89.26.66.9...
September6.214.614.57.47.75.5...
October7.114.314.46.89.53.7...
November8.214.013.78.18.74.4...
December7.515.212.68.68.84.7...
Period average7.810.615.510.57.26.8...
Source: Data provided by the Lao P.D.R. authorities.
Source: Data provided by the Lao P.D.R. authorities.
Table 6.Lao P.D.R.: Consumer Price Indices Components, 2004–07(Twelve-month percentage change)
Weight2004200520062007
Mar.Jun.Sept.Dec.Mar.Jun.Sept.Dec.Mar.Jun.Sept.Dec.Mar.
Foods46.214.514.54.07.55.54.89.412.010.910.67.79.412.3
Rice, bread, flour, and other cereals14.727.023.9-7.7-1.9-4.3-2.09.517.622.023.224.523.527.3
Meat and poultry12.16.310.721.019.214.07.98.210.09.99.26.14.96.7
Fish4.49.312.820.212.78.49.47.87.54.74.44.14.85.8
Dairy products and egg0.99.211.935.734.229.121.011.38.75.9-0.8-1.5-1.5-0.8
Oils and fats0.213.310.29.810.08.24.23.31.90.90.7-0.2-2.2-1.6
Fruit and vegetables5.35.19.20.67.510.912.213.713.5-0.7-1.8-7.62.912.5
Sugar, sweets2.94.23.51.40.60.62.99.511.223.431.423.720.09.6
Spices1.99.58.35.07.66.15.95.11.52.32.710.711.110.7
Alcoholic beverages and tobacco6.410.810.35.73.52.60.91.23.15.37.59.17.67.8
Alcoholic beverages4.09.68.94.53.95.03.93.53.54.78.010.68.07.3
Tobacco2.412.812.57.52.9-1.1-3.6-2.22.65.85.85.06.88.8
Clothing and foot wear4.97.97.78.66.87.08.07.19.06.25.23.61.73.5
Men’s clothing1.39.310.514.310.910.59.26.410.17.45.24.61.94.4
Ladies’ clothing1.33.34.35.43.62.22.32.33.91.7-0.5-0.7-1.60.3
Children’s clothing1.27.45.75.54.15.39.68.911.39.011.07.06.27.8
Foot wear0.814.012.48.87.79.611.512.011.67.55.73.80.41.4
Housing3.819.621.018.614.48.64.62.33.03.53.13.11.41.6
Water charges0.36.85.94.65.75.35.94.24.64.14.04.02.31.9
Housing maintenance and repair1.515.046.346.643.015.015.11.42.62.60.1-1.2-2.4-2.4
House repair (labor cost)0.225.425.521.915.69.23.41.82.53.4-0.9-1.0-2.9-2.4
House construction/extensions (labor cost)0.48.36.07.58.68.28.99.79.18.97.84.12.72.1
Fuel and power1.912.06.95.08.711.314.020.616.212.29.83.83.02.5
Household goods8.17.27.47.59.86.77.48.18.38.17.24.31.44.1
Household furniture1.66.54.62.92.22.92.21.53.03.74.65.44.23.0
Household operation3.38.36.911.911.38.79.07.57.79.98.63.72.30.3
Medical care3.814.918.114.810.34.72.01.10.70.70.71.20.50.5
Transport and communications17.99.76.610.811.39.27.710.28.57.77.21.8-2.0-1.7
Personal transport15.713.09.211.112.09.89.412.68.87.96.90.5-2.2-1.9
Public transport1.8-3.5-4.89.710.58.71.61.38.18.18.89.52.32.9
Communications0.412.512.510.3-0.6-1.00.20.71.21.2-2.7-3.2-5.1-5.1
Recreation, education, and printed matter4.78.28.07.36.95.44.92.12.62.62.84.22.93.0
Personal care and effects4.28.76.57.08.35.75.96.48.112.014.512.97.54.8
Total100.012.611.97.48.66.55.47.78.88.28.15.54.74.7
Source: Data provided by the Lao P.D.R. authorities.
Source: Data provided by the Lao P.D.R. authorities.
Table 7.Lao P.D.R.: General Government Operations, 2000/01–2006/07
2000/012001/022002/032003/042004/052005/062006/07

Budget
(In billions of kip)
Revenue and grants2,4762,6832,7983,1043,8864,9625,370
Revenue2,0002,3242,3452,8223,3874,2664,689
Tax1,6291,8751,9282,3372,8033,6414,086
Of which: non renewable resources1/2417233295291698
Of which: renewable resources1/514645329399103
Of which: non resource revenue1,5541,8121,8602,2732,6153,2523,285
Nontax372449417484584625602
Grants476359453283499696681
Expenditure3,2743,1754,0033,9705,2046,2056,761
Current1,1231,2801,5271,8382,5173,1243,603
Wages, salaries, and benefits4105476689001,0581,2631,540
Transfers243265341309514674874
Interest payments134138123235318277394
Of which: external117108115194267244361
Other recurrent336330394394626911795
Capital and net onlending 2/2,0451,7852,3701,6462,2612,5292,788
Others and contingencies 3/107203120237347348370
Above below-the-line discrepancy...-93-1424980203...
Overall balance-798-492-1,205-866-1,318-1,242-1,392
Non resource balance 4/-873-555-1,273-930-1,506-1,632-2,178
Financing7984921,2058661,3181,2421,392
Domestic financing (net) 5/2538397-5764-427-28
Foreign financing (net)5454091,1089231,2541,6701,419
Disbursements7926911,3091,1511,5511,9821,819
Amortization-247-282-201-228-296-312-400
(In percent of GDP)
Revenue and grants16.315.113.012.113.114.814.2
Revenue13.213.110.911.011.412.712.4
Tax10.710.68.99.19.410.810.8
Of which: non renewable resources 1/0.20.10.10.10.30.91.8
Of which: renewable resource 1/0.30.30.20.10.30.30.3
Of which: non resource revenue10.210.28.68.98.89.78.7
Nontax2.42.51.91.92.01.91.6
Grants3.12.02.11.11.72.11.8
Expenditure21.517.918.615.517.518.517.8
Current7.47.27.17.28.59.39.5
Wages, salaries, and benefits2.73.13.13.53.63.84.1
Transfers1.61.51.61.21.72.02.3
Interest payments0.90.80.60.91.10.81.0
Other recurrent2.21.91.81.52.12.72.1
Capital and net onlending 2/13.510.111.06.47.67.57.4
Others and contingencies 3/0.71.10.60.91.21.01.0
Discrepancy including unidentified expenditure...-0.5-0.11.00.30.6...
Overall balance-5.3-2.8-5.6-3.4-4.4-3.7-3.7
Non resource balance 4/-5.7-3.1-5.9-3.6-5.1-4.9-5.7
Financing5.32.85.63.44.43.73.7
Domestic financing (net) 5/1.70.50.4-0.20.2-1.3-0.1
Foreign financing (net)3.62.35.13.64.25.03.7
Memorandum items:
Nominal GDP (in billions of kip)15,19417,72621,54825,55329,66333,61237,926
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.

Non-renewable resource: royalties and taxes from mining; renewable resource: those from hydro-power.

Net onlending includes the government NT2 equity purchase.

Includes payments on liabilities carried in from the previous budget years and arrears clearance.

Overall balance net of resource revenues.

Excludes bank restructuring bonds.

Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.

Non-renewable resource: royalties and taxes from mining; renewable resource: those from hydro-power.

Net onlending includes the government NT2 equity purchase.

Includes payments on liabilities carried in from the previous budget years and arrears clearance.

Overall balance net of resource revenues.

Excludes bank restructuring bonds.

Table 8.Lao P.D.R.: General Government Revenue, 2000/01–2006/07
2000/012001/022002/032003/042004/052005/062006/07

Budget
(In billions of kip)
Revenue2,0002,3242,3452,8223,3874,2664,689
Tax1,6291,8751,9282,3372,8033,6414,086
Of which: non-renewable resource 1/2417233295291698
Of which: renewable resource 1/514645329399103
Of which: non resource revenue1,5541,8121,8602,2732,6153,2523,285
Profit tax205239225222307459733
Mining0000073388
Hydro0000364233
Others205239225222271344306
Income tax145125140179215234241
Turnover tax318375466594673887872
Excise tax371286293483523800870
Import duties179240316351429515518
Timber royalty receipts182362218225189172150
Natural resource tax2417233295218310
Hydro royalties51464532575770
Other fees6192107136211163193
Other92939482104136130
Nontax372449417484584625602
SOE dividends678487106178175180
Over flight revenues114187174198222229227
Others190177156180185222195
(In percent of GDP)
Revenue13.213.110.911.011.412.712.4
Tax10.710.68.99.19.410.810.8
Of which: non-renewable resource 1/0.20.10.10.10.30.91.8
Of which: renewable resource 1/0.30.30.20.10.30.30.3
Of which: non resource revenue10.210.28.68.98.89.78.7
Profit tax1.41.41.00.91.01.41.9
Mining0.00.00.00.00.00.21.0
Hydro0.00.00.00.00.10.10.1
Others1.41.41.00.90.91.00.8
Income tax1.00.70.60.70.70.70.6
Turnover tax2.12.12.22.32.32.62.3
Excise tax2.41.61.41.91.82.42.3
Import duties1.21.41.51.41.41.51.4
Timber royalty receipts1.22.01.00.90.60.50.4
Natural resource tax0.20.10.10.10.30.60.8
Hydro royalties0.30.30.20.10.20.20.2
Other fees0.40.50.50.50.70.50.5
Other0.60.50.40.30.30.40.3
Nontax2.42.51.91.92.01.91.6
SOE dividends0.40.50.40.40.60.50.5
Over flight revenues0.81.10.80.80.70.70.6
Other1.31.00.70.70.60.70.5
Memorandum items:
Nominal GDP (fiscal year; in billions of kip)15,19417,72621,54825,55329,66333,61237,926
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.

Non-renewable resource: royalties and taxes from mining; renewable resource: those from hydro-power.

Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.

Non-renewable resource: royalties and taxes from mining; renewable resource: those from hydro-power.

Table 9.Lao P.D.R.: General Government Expenditure, 2000/01–2006/07
2000/012001/022002/032003/042004/052005/062006/07

Budget
(In billions of kip)
Expenditure 1/3,2743,2684,0173,7215,1246,0026,761
Current1,1231,2801,5271,8382,5173,1243,603
Wages, salaries and benefits4105476689001,0581,2631,540
Salaries230396493706869......
Remuneration180152175194190......
Transfers243265341309514674874
Allowances and social welfare127156172204317......
Of which: social welfare2934406081......
Subsidies and transfers116109169105196......
Interest payments134138123235318277394
Domestic1730941513233
External117108115194267244361
Other recurrent336330394394626911795
Capital and onlending2,0451,7852,3701,6462,2612,5292,788
Domestically financed1,0059951,026592468403517
Externally financed1,2009311,4991,1691,5311,9562,416
Onlending (net) 2/-160-141-156-115261171-145
Others and contingencies 2/107203120237347348370
(In percent of GDP)
Expenditure 1/21.518.418.614.617.317.917.8
Current7.47.27.17.28.59.39.5
Wages, salaries and benefits2.73.13.13.53.63.84.1
Salaries1.52.22.32.82.9......
Remuneration1.20.90.80.80.6......
Transfers1.61.51.61.21.72.02.3
Allowances and social welfare0.80.90.80.81.1......
Of which: social welfare0.20.20.20.20.3......
Subsidies and transfers0.80.60.80.40.7......
Interest payments0.90.80.60.91.10.81.0
Domestic0.10.20.00.20.20.10.1
External0.80.60.50.80.90.71.0
Other recurrent2.21.91.81.52.12.72.1
Capital and onlending13.510.111.06.47.67.57.4
Domestically financed6.65.64.82.31.61.21.4
Externally financed7.95.37.04.65.25.86.4
Onlending (net) 2/-1.1-0.8-0.7-0.50.90.5-0.4
Others and contingencies 3/0.71.10.60.91.21.01.0
Memorandum items:
Nominal GDP (in billions of kip)15,19417,72621,54825,55329,66333,61237,926
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.

Does not include above below-the-line discrepancy and differs from Table 7.

Net onlending includes the government NT2 equity purchase.

Includes payments on liabilities carried in from the previous budget years and arrears clearance.

Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.

Does not include above below-the-line discrepancy and differs from Table 7.

Net onlending includes the government NT2 equity purchase.

Includes payments on liabilities carried in from the previous budget years and arrears clearance.

Table 10.Lao P.D.R.: Monetary Survey, 2002–06 1/
20022003200420052006
Mar.Jun.Sept.Dec.Mar.Jun.Sept.Dec.Mar.Jun.Sept.Dec.
(In billions of kip; end of period)
Net foreign assets2,3262,7242,9633,2983,1153,3213,4163,3313,0214,6244,6073,4593,9124,912
Bank of Lao P.D.R.1,6121,7971,7562,0221,9811,9891,9722,1412,0742,2492,3312,5202,6882,984
Commercial banks7139271,2071,2761,1341,3331,4441,1909472,3752,2769391,2241,928
Net domestic assets1,1101,3711,5071,3261,6981,7071,8411,8072,1827929572,1682,1882,134
Domestic credit2,2592,3232,3912,1962,5172,4662,7152,4932,8962,9532,9722,7252,6732,528
Net claims on government-379-131-166-373-162-210-109-211-11173105-302-290-89
Credit to the economy2,6382,4542,5572,5692,6782,6762,8242,7033,0072,8802,8673,0262,9632,617
Of which: in foreign currency2,2402,0832,1642,2092,3302,2722,4022,2512,5152,3222,2342,3592,2891,908
Credit to private sector1,5051,4801,5711,5521,6831,6771,8521,9582,2962,1442,1422,2042,1992,061
Of which: in foreign currency1,1371,1261,1951,2051,3461,2871,4421,5171,8181,6031,5471,5821,5671,404
Credit to state enterprises1,1339749871,017995999972745711736725822764556
Of which: in foreign currency1,1049579691,004984986959733696719687776722503
Other items (net)-1,150-953-884-870-819-759-874-685-714-2,160-2,015-556-485-394
Broad money3,4354,0954,4714,6234,8135,0295,2575,1385,2035,4165,5645,6276,1007,046
Narrow money4936998477818591,0491,2611,1701,1891,4151,4281,4271,5011,998
Currency outside banks1352623063163505115785796138058557828491,231
Demand deposits358437541465509537683591577610573645652768
Quasi-money2,9423,3963,6233,8423,9533,9803,9963,9694,0144,0014,1364,2004,5985,048
Time and savings deposits452762813897919897853864879843877845896945
Foreign currency deposits2,4902,6342,8112,9453,0343,0833,1433,1053,1353,1593,2593,3553,7024,103
(Annual percentage change)
Domestic credit-7.32.83.22.97.06.113.513.515.119.89.59.3-7.7-14.4
Credit to the economy3.3-7.0-4.81.35.49.010.45.212.37.61.511.9-1.5-9.1
Broad money27.019.221.321.722.422.817.611.18.17.75.89.517.230.1
Memorandum items:
Exchange rate
(Kip/US$; end of period, annual percentage change)11.9-1.4-2.01.13.70.00.20.8-0.13.2-1.0-5.8-7.8-10.3
Money multiplier3.23.03.13.23.13.33.23.13.13.03.02.92.82.8
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.

Valued at current exchange rates.

Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.

Valued at current exchange rates.

Table 11.Lao P.D.R.: Balance Sheet of the Bank of the Lao P.D.R., 2002–06 1/
20022003200420052006
Mar.Jun.Sept.Dec.Mar.Jun. 2/Sept.Dec.Mar.Jun. 2/Sept.Dec.
(In billions of kip; end of period)
Net foreign assets16121797175620221981198919722141207422492331252026882984
Foreign assets20772257219624432387238023392489242325742634281529733258
Foreign liabilities-464-459-440-421-407-392-367-348-350-325-304-295-286-273
Net domestic assets-538-428-329-582-425-447-307-460-404-426-470-589-535-482
Net domestic credit55044048930250440953511416714447-95-19108
Net claims on government-411-375-356-552-360-451-302-401-355-433-409-552-419-282
Of which: in foreign currency-419-350-293-459-327-353-238-346-365-501-495-567-630-642
Claims on government239234219233203186216266295261410423400620
Of which: in foreign currency10490647273717042585352464542
Government deposits-650-609-575-785-563-637-518-667-650-694-819-975-820-902
Of which: in foreign currency-523-439-357-531-400-424-308-389-424-554-546-613-675-684
Claims on state enterprises567524555565570575559237237228208193181176
of which: in foreign currency566523554565570575559237237228208193181176
Claims on private sector176153153155156154151150140127108907470
Of which: in foreign currency176152152154156153151150140127108907470
Claims on other banking institutions218138139134138131128128145222140174146143
Of which: in foreign currency10226262320191919181817471511
BOL securities-166-46-3800000000000
Other items (net)-922-823-780-884-929-855-842-574-572-426-470-589-535-482
Government lending funds-428-324-349-368-369-357-342-341-349-340-314-297-284-276
Other items-494-499-430-516-559-498-500-233-223-86-156-292-251-206
Reserve money10741369142714401556154216651681166918231861193121532502
Of which: in kip30258160659970972483684187510211092102812031567
Currency in circulation (in kip)1352623063163505115785796138058557828491231
Vault cash (in kip)476396110988112613310272119121111106
Bank deposits8931044102510141107950960969955947887102811931165
Of which: in kip120256203173261132132130160145118125243231
Required reserves47752555400000000000
Of which: in kip60839000000000000
Excess reserves (clearing deposits in kip)60172113173261132132130160145118125243231
Other deposits (in FC)355346358841847821811841795802768455466410
Capital deposits191135133136143152153206214159152144154152
Clearing deposits 3/164211225705703666658634581643617312312258
Private sector demand deposits00001301100000
(In millions of U.S. dollars)
Net foreign assets of Bank of Lao PDR (a)152172169190183190183199191208226249269308
Forex component of reserve money (b)7375797978788078737475899596
Net official international reserves (= (a) - (b))799690111105112104121118134152160174211
Source: Data provided by the Lao P.D.R. authorities.

Valued at current exchange rates.

Includes debt write-offs on NPLs to SOEs (amounting to Kip 320 billion), reflected in a decrease in claims on state enterprises and a corresponding adjustment in provisioning under other items.

From May 2004, includes required reserves.

Source: Data provided by the Lao P.D.R. authorities.

Valued at current exchange rates.

Includes debt write-offs on NPLs to SOEs (amounting to Kip 320 billion), reflected in a decrease in claims on state enterprises and a corresponding adjustment in provisioning under other items.

From May 2004, includes required reserves.

Table 12.Lao P.D.R.: Summary Balance Sheet of All Commercial Banks, 2002–06 1/
20022003200420052006
Mar.Jun.Sept.Dec.Mar.Jun.Sept.Dec.Mar.Jun.Sept.Dec.
(In billions of kip; end of period)
Net foreign assets7139271,2071,2761,1341,3331,4441,190947-1,167-1,228-1,230-1,236-1,286
Foreign assets1,5771,7171,9622,1512,1202,3212,4562,1932,1971,1391,1279391,2241,928
Foreign liabilities-864-790-755-876-986-989-1,012-1,003-1,249-2,306-2,355-2,169-2,459-3,214
Net domestic assets2,5872,9062,9573,0323,3283,1843,2353,3703,6435,7795,9376,0756,4867,102
Net domestic credit1,9282,0212,0412,0282,1512,1882,3082,5072,8742,7672,8042,9942,8372,564
Net claims on government32244190179198241194190243241253250129193
Claims on government69324300334374356365376452464483556562549
Government deposits-37-81-109-156-175-115-171-186-209-223-230-305-433-356
Of which: in foreign currency-16-58-51-91-100-53-85-112-117-134-135-188-245-194
Of which: in kip-21-22-58-65-75-62-86-74-92-89-95-118-189-162
Claims on state enterprises566451432452425423413508475508518630583380
Of which: in foreign currency537434415439415411401496460491480583542327
Claims on private sector1,3291,3271,4181,3971,5271,5241,7011,8092,1562,0172,0342,1142,1251,990
Of which: in foreign currency9619741,0431,0511,1901,1331,2911,3681,6781,4761,4391,4931,4931,334
Other items (net)6608849161,0041,1779969278637693,0123,1333,0813,6494,538
Credit from monetary authorities-252-166-164-163-103-98-94-94-93-150-173-203-113-165
Other liabilities-172-352-338-283-349-447-522-530-505-488-480-347-289-468
Capital account-487-201-162-109-88-47-70-137-193-192-314-448-557-159
Restricted deposits-24-20-72-20-20-22-20-22-41-28-26-805-859-904
Other assets656523551487551622588598580600790825895882
Reserves9411,1011,1021,0921,1879891,0461,0481,0213,2693,3354,0594,5725,352
Deposits3,3013,8324,1644,3074,4624,5174,6794,5604,5914,6124,7094,8455,2515,815
Kip deposits8101,1981,3531,3631,4281,4351,5351,4551,4561,4531,4501,4901,5491,712
Current deposits358437541465509537683591577610573645652768
Time and savings deposits452762813897919897853864879843877845896945
Foreign currency deposits2,4902,6342,8112,9453,0343,0833,1433,1053,1353,1593,2593,3553,7024,103
(In millions of U.S. dollars; end of period)
Net foreign assets678911612010512713911187-108-119-122-124-133
Foreign currency deposits234252271277280295302289289292316332370423
Memorandum item:
NFA coverage of foreign currency deposits (percent)28.635.242.943.337.443.245.938.330.2-37-38-37-33-31
Source: Data provided by the Lao P.D.R. authorities.

Valued at current exchange rates.

Source: Data provided by the Lao P.D.R. authorities.

Valued at current exchange rates.

Table 13.Lao P.D.R.: Summary Balance Sheet of State-owned Commercial Banks, 2002–06 1/2/
20022003200420052006
Mar.Jun.Sept.Dec.Mar.Jun.Sept.Dec.Mar.Jun.Sept.Dec.
(In billions of kip; end of period)
Net foreign assets4895658639658639849897416296267206318331,312
Foreign assets1,0068751,1621,2921,1871,3201,3101,0569889671,0249271,1171,638
Foreign liabilities517310299328323335322315359341304297284326
Net reserves400642620639701502515460434400492579722689
Reserves516675655673730531539483458480514630739706
Credit from monetary authorities11633353430292424248022511717
Claims on government (net)-2201175150137177135128126110117686874
Claims in kip14259226241236230219240243243251255311267
Claims in foreign currency-16-58-51-91-99-53-85-111-117-133-134-187-244-193
Net domestic assets (excluding net credit to government)1,5931,4131,3581,4201,5161,5291,6881,8071,9362,0311,8981,9711,8431,675
Credit to the economy1,2249519729871,0761,0351,2001,3261,4471,5261,4891,6591,5761,184
Of which: in foreign currency1,0288178238308998229741,0901,1701,1971,1211,2861,198787
Credit to state enterprises44933131531328027727734830632631541235595
Credit to private sector7766206576747967579239791,1411,2001,1751,2461,2221,089
Other items (net)368462387433440495489481489504409312267491
Deposits2,4802,8223,0173,1733,2173,1933,3273,1363,1253,1663,2273,2493,4663,750
Deposits in kip6059031,0231,0181,0461,0281,0819809579579779789961,005
Deposits in foreign currency1,8751,9191,9932,1562,1712,1652,2462,1562,1682,2092,2502,2712,4702,745
(In millions of U.S. dollars; end of period)
Net foreign assets46548391809495695858706283135
Foreign currency credit to the economy9778797883799410210811110912712081
Foreign currency net credit to government-2-6-5-9-9-5-8-10-11-12-13-18-24-20
Foreign currency deposits177183192202200207216201200204218224247283
(Annual percentage change)
Credit to the economy (excluding credit to government)-6.1-22.3-19.7-12.07.78.823.534.434.533.217.717.8-4.9-22.1
Of which: in foreign currency1.0-20.6-18.4-12.94.90.618.431.430.229.67.812.1-11.0-32.4
Deposits23.413.812.914.815.213.110.3-1.2-2.9-2.643.63.412.417.3
Memorandum items:
Issue of debt clearance bonds, accumulative stocks (kip billions)0.0207.8207.8207.8244.2244.2244.2244.2244.2244.2372.9443.9444.9444.9
Net foreign assets coverage of foreign currency deposits (percent)26.129.543.344.739.845.544.034.429.028.332.027.833.747.8
Reserves to deposits ratio0.20.20.20.20.20.20.20.20.10.20.20.20.20.2
Exchange rate (kip/USS; end of period)10,62010,47010,38110,64910,85010,46510,40010,73510,84310,80510,30010,11610,0029,696
Source: Data provided by the Lao P.D.R. authorities.

Comprises Banque pour le Commerce Exterieur (BCEL) and Lao Development Bank (LDB).

Valued at current exchange rates.

Source: Data provided by the Lao P.D.R. authorities.

Comprises Banque pour le Commerce Exterieur (BCEL) and Lao Development Bank (LDB).

Valued at current exchange rates.

Table 14.Lao P.D.R.: Interest Rates, 2001—06
200120022003200420052006
(In percent; end of period)
Local banks (representative rates) 1/
Deposit rates
Savings (U.S. dollar accounts)2.01.00.40.30.51.3
Fixed (U.S. dollar accounts)
3 months2.51.50.50.41.01.8
6 months3.01.80.60.81.32.5
12 months3.52.30.81.01.53.0
Savings (kip accounts)12.015.012.05.03.03.0
Fixed (kip accounts)
3 months16.017.015.08.05.06.0
6 months18.019.018.09.08.08.0
12 months20.021.020.010.09.010.0
Lending rates
Overdraft
Kip24.024.028.021.020.020.0
Baht10.010.012.012.012.012.0
U.S. dollar11.011.011.012.012.012.0
Foreign banks (representative rates) 2/
Deposit rates
Savings (U.S. dollar accounts)0.50.50.50.30.30.5
Fixed (U.S. dollar accounts)
3 months1.01.01.00.50.50.8
6 months1.01.01.00.50.5...
12 months2.02.02.00.80.8...
Lending rates
Overdraft
Kip22.022.022.022.022.022.0
Baht14.014.014.013.013.016.0
U.S. dollar11.011.011.010.510.512.0
Source: Data provided by the Lao P.D.R. authorities.

Local banks representative rates are from Banque Pour Le Commerce Exterieur Lao.

Foreign banks representative rates are from Thai Military Bank Branch.

Source: Data provided by the Lao P.D.R. authorities.

Local banks representative rates are from Banque Pour Le Commerce Exterieur Lao.

Foreign banks representative rates are from Thai Military Bank Branch.

Table 15.Lao P.D.R.: Balance of Payments, 2000–06
2000200120022003200420052006

Est.
(In millions of U.S. dollars; unless otherwise indicated)
Current account-183-146-131-175-358-582-456
Excluding official transfers-299-209-180-237-417-639-567
Merchandise trade balance-376-288-263-244-478-559-388
Exports, f.o.b.342362370450500646996
Imports, c.i.f.71865063369497712061384
Services (net)13212513195132161171
Income (net)-75-67-70-113-98-269-409
Of which: interest payments-38-35-29-38-54-106-94
Of which: public debt-11-11-10-15-27-31-24
Transfers (net)1368571868585170
Private21222324262859
Official1156348626057111
Capital account227145187197376599556
Medium- and long-term loans6366127118118115164
Disbursements99105165146147156195
Amortization-36-39-38-28-29-41-31
Foreign direct investment31246042234349319
Net foreign assets of commercial banks (increase -)2528-7-21-3922-93
Other private flows and errors and omissions1082765863113166
Overall balance44-15522191799
Financing-441-55-22-19-17-99
Central bank net foreign assets-441-55-22-19-17-99
Assets (increase -)-336-62-18-12-11-98
Liabilities (reduction -)-10-57-4-6-6-1
Memorandum items:
Current account (percent of GDP)
(Excluding official transfers)-17.2-11.9-9.9-11.0-16.6-22.1-16.5
Gross official reserves
(In millions of U.S. dollars)127134196214226238336
(In months of goods and services imports)2.62.43.03.23.02.83.6
Nominal GDP at market prices (US$ million)1,7401,7621,8182,1492,5082,8873,437
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.
Table 16.Lao P.D.R.: Merchandise Trade by Major Commodity, 2000–06(In millions of U.S. dollars; unless otherwise indicated)
2000200120022003200420052006

Est.
Merchandise exports342.1361.8370.1450.1499.6646.3996.0
Gold0.00.00.060.157.890.7116.1
Copper0.00.00.00.00.0112.1409.3
Electricity112.2106.4103.686.691.1107.0107.1
Timber70.1106.7114.2128.2144.9136.8158.1
Garments105.9112.9113.9129.9154.7138.0132.0
Coffee12.114.917.111.214.421.929.9
Other41.820.921.334.236.840.043.5
Merchandise imports717.8650.3633.1693.7977.21,205.61,384.1
Petroleum159.987.2100.689.6107.6159.5201.3
Capital goods236.3226.9197.1271.6467.6615.0728.0
Garments materials62.582.379.986.6115.5103.098.6
Electricity5.86.55.06.818.223.125.1
Other253.2247.5250.5239.1268.4305.0331.2
Trade balance-375.7-288.5-263.0-243.6-477.6-559.3-388.2
(in percent of GDP)-21.6-16.4-14.5-11.3-19.0-19.4-11.3
Memorandum items:
Export volume growth (goods and services; percent)...8.61.1-3.65.614.23.5
Import volume growth (goods and services; percent)...-5.6-6.517.028.214.02.2
Terms of trade (percent change)...-2.7-1.66.80.84.431.0
Gold volume (000s oz.)0.00.00.0165.3141.2203.8192.0
Electricity exports (GWh)2,961.92,870.42,751.42,285.02,424.02,830.02,820.0
Electricity imports (GWh)160.0182.0200.7229.3277.6290.0369.4
Sources: Lao P.D.R. authorities, Eurostat, Comtrade, and Fund staff estimates.
Sources: Lao P.D.R. authorities, Eurostat, Comtrade, and Fund staff estimates.
Table 17.Lao P.D.R.: External Aid and Loan Disbursements, 2000–06(In millions of U.S. dollars)
2000200120022003200420052006
Grants 1/115.063.247.762.459.549.2100.4
Bilateral114.663.043.062.456.445.487.6
Program grants0.02.812.012.312.610.621.0
Project grants114.660.231.050.143.834.866.6
Of which: Technical assistance22.111.27.7............
Multilateral0.40.24.70.03.23.812.8
UN agencies0.10.03.60.00.10.00.1
AsDB0.00.00.20.00.40.83.1
Other (including NGOs)0.30.20.80.02.63.09.6
Loan disbursements98.3105.1105.0128.9113.8156.3159.7
Program loans11.30.05.022.012.34.415.0
IDA0.00.00.07.012.34.40.0
AsDB11.30.05.015.00.00.015.0
Project loans87.0105.1100.0106.9101.5151.9144.7
AsDB37.751.936.046.051.873.267.2
IDA26.836.447.839.627.532.029.0
IFAD2.54.25.53.03.83.55.7
OPEC4.63.91.81.92.61.70.3
Nordic Fund2.56.81.11.46.01.24.3
OECF0.00.42.2-1.00.00.00.0
Other12.91.55.616.09.740.238.4
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.

Includes project related and general technical assistance.

Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.

Includes project related and general technical assistance.

Table 18.Lao P.D.R.: International Reserves, 2001–06(In millions of U.S. dollars)
200120022003200420052006
Net foreign assets of the banking system150219260317428507
Foreign assets253344380449452667
Foreign liabilities10312511913224161
Central bank net foreign assets96152172190208308
Foreign assets133196216227238336
Foreign liabilities384444373028
Commercial banks’ net foreign assets556789127220199
Foreign assets120149164222213331
Foreign liabilities65817594-6133
Source: Data provided by the Lao P.D.R. authorities.
Source: Data provided by the Lao P.D.R. authorities.
Table 19.Lao P.D.R.: Debt Stock and Debt Service, 2000–06 1/(In millions of U.S. dollars)
2000200120022003200420052006

Est.
Total debt stock (public and private)1,4471,4581,6142,1712,5302,9103,179
Public debt1,1791,2131,3301,9152,0862,2252,416
Bilateral official796864437453476506
Of which: Russian Federation.........387387385382
Multilateral1,0421,0891,1911,3381,5161,6211,759
Of which:
AsDB541575603715754810871
IDA394407435485618649684
IMF48374346383228
Commercial585675140117127151
Private debt268245284257444685762
Total debt service81847691120182219
Amortization434947567082132
Public debt20252728294131
Bilateral official2441595
Multilateral17202326222927
Of which: IMF8999363
Commercial0100490
Private debt242420274140101
0000
Interest payments383529354910088
Public debt11111012222618
Bilateral (official debt)1111595
Multilateral99911161413
Of which: IMF1100000
Commercial1100220
Private debt27242023277570
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.

Debt service and the stock of debt are calculated on the basis of existing debt, and currently identified disbursements.

Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.

Debt service and the stock of debt are calculated on the basis of existing debt, and currently identified disbursements.

Table 20.Lao P.D.R.: Composition of Net Foreign Income, 2000–06(In millions of U.S. dollars; unless otherwise indicated)
2000200120022003200420052006
Receipts7.35.64.73.512.516.829.3
Payments to Lao workers by embassies0.60.60.70.70.80.90.9
Interest on Bank of Lao P.D.R. reserve assets4.23.91.91.94.26.813.3
Interest on commercial banks nostro accounts2.51.12.10.97.59.115.0
Income from royalty0.00.00.00.00.00.00.0
Payments78.074.069.0116.3110.2285.9437.8
Payments to foreign workers in Lao embassies0.40.40.40.50.50.50.5
Income from direct investment in Lao P.D.R.34.636.736.277.755.9179.5343.7
Interest on official borrowing10.010.29.511.922.425.318.2
Interest on Bank of Lao P.D.R. foreign liabilities0.60.60.70.00.10.20.0
Interest on commercial banks foreign liabilities5.52.02.63.24.55.75.7
Interest payable on other private debt26.924.119.523.126.874.769.7
Net foreign income-70.6-68.4-64.3-112.8-97.7-269.1-408.5
(In percent of GDP)-4.1-3.9-3.5-5.3-3.9-9.3-11.9
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.
Table 21.Lao P.D.R.: Composition of Net Services, 2000–06(In millions of U.S. dollars; unless otherwise indicated)
2000200120022003200420052006
Receipts175.6166.0176.3147.5187.0222.2240.0
Transportation19.722.729.821.029.731.336.0
Overflight11.314.922.118.021.924.128.3
Freight to Lao carriers (exports)2.92.72.62.62.82.62.7
International fares to Lao carriers3.73.53.43.23.22.83.3
Lao port charges1.81.61.81.61.81.81.7
Travel113.9103.8106.884.0119.0150.0160.0
Communications15.713.714.715.616.516.518.8
Insurance0.80.31.02.22.65.26.0
Embassies (nonsalary)25.525.524.024.719.219.219.2
Payments43.143.844.352.155.161.269.1
Transportation4.95.45.76.06.57.48.5
International fares to foreign carriers4.14.34.54.75.25.96.8
Foreign port charges0.81.11.21.21.31.51.7
Travel8.18.413.513.514.716.819.3
Communications4.35.64.44.45.05.05.0
Construction11.915.614.316.516.819.122.0
Hydropower0.50.00.00.00.00.00.0
Other projects11.415.614.316.516.819.122.0
Technical assistance (50 percent of inflow)11.55.62.24.24.95.05.5
Lao embassies abroad (nonsalary)2.42.42.43.22.42.52.5
Services (net)132.5122.2132.095.4131.9161.0170.9
(In percent of GDP)7.66.97.34.55.35.65.0
Memorandum item:
Tourist arrivals (000s)737.2673.8735.7636.4894.81,095.31,161.0
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.
Sources: Data provided by the Lao P.D.R. authorities; and Fund staff estimates.
Lao P.D.R.: Summary of Tax System as of End-May 2007
TaxNature of TaxExemptions and DeductionsRates
1.Tax Taxes on income and profits
1.1Tax on enterprise profits (profit tax)Annual levy on profits derived in the Lao P.D.R. by enterprises from business operations (production, trade, and service), payable in advance on a quarterly basis.a. Expenses normally incurred in producing income with limits for reception and travel costs (0.40 percent for each trip) of annual income.



b. Asset amortization of each asset permitted, using fixed line or declining balance methods and using the following five annual rates: 50 percent:, business formation; 20 percent: land transportation, machines and other equipment; 10 percent: sea transport equipment, office improvement, supplies and temporary trade premises; 5 percent: industrial premises used < 20 years, permanent trade premises and air transport; 2.5 percent: industrial premises used between 21-40 years. Unallowed residue is deducted from the sale price to compute the profit or loss.



c. Carry-forward of losses available for up to 3 years.



d. Three computational regimes. Full real regime: based on extended accounting system for foreign investors, import-export traders and businessmen with annual turnover greater than KN 2,400 million; partial real regime: based on ordinary or
General rateTax Rate (In percent)

35
Foreign investors
Discount rates applies only to the sectors under the investment promotion:
For enterprises in designated areas/city20
For enterprises in rural and lowland areas15
For enterprises in mountain and remote areas.10
common accounting system, for other businessmen with annual turnover between 200 million and 2,400 million kip; contract regime: for those with primary accounting system, based on agreed estimation for turnover less than 200 million kip with progressive rates for production, construction, and transport (8-10 percent), trade (5 percent), and services, drinking bars (20 percent).

e. Amounts appropriated to savings or recapitalization accounts, bonuses, meeting allowances or received from capital reduction, enterprise merging, share transfer, bankruptcy or debt liquidation.

f. Reliefs: Case-by-case tax relief given to new foreign and domestic investment promotion law.
1.2Minimum profit taxApplicable to gross turnover of the previous year of those enterprises subject to the extended or ordinary accounting system. Payment on an annual basis. Creditable against final profit tax liability but no reimbursement of over payment.Foreign and local investors who are in a system of annual profit tax exemption.Domestic production0.25 percent
Other businesses1 percent
1.3Tax on social/religious/cultural organizations and associationsIncomes from immovable property leasing and non-business activities of public or other social associations.None10 percent
1.4Tax on personal income from employmentLevied on wages, salaries, bonuses, and other emoluments derived from employment in Lao P.D.R. or, when deputed to international organizations, by Lao citizens receiving emoluments abroad on which they are not taxed. Withheld at source by the employer on a monthly basis.All persons with monthly wages or salaries below kip 300,000.

Exemptions are granted to a selected list (12) of incomes, including income from agricultural production by peasants themselves, from cultural events, etc.
Monthly Wage or SalaryTax Rate
(In kip)(In percent)
300,001-1,500,0005
1,500,001-4,000,00010
4,000,001-8,000,00015
8,000,001-15,000,00020
15,000,001 and above25
1.5Tax on personal incomes of persons in self-employmentLevied on net profits made by individuals from business operations, and immovable property leasing. Payment on an advance quarterly basis.Less than kip 2,400,001 is exempt.General ActivitiesTax Rate
(In kip)(In percent)
2,400,001-5,000,00010
5,000,001-10,000,00015
10,000,001-30,000,00020
30,000,001-60,000,00030
60,000,000 and above
1.6Tax on personal incomes from immovable property leasingLevied on incomes received by individuals from immovable property leasing.15 percent of rent price
1.7Tax on investment incomeLevied on incomes of entities and individuals from gross market-based rents, dividends, lending interest rates, and guarantee fees on a global basis, where appropriate.Interest on bank deposits10 percent
1.8Tax on property rightsCopyright or other intellectual property rights of individual or business entity.None5 percent
2.Taxes on land andTax Rate
property(In percent)
2.1Transfer taxesApplied to the market value of real estate property transferred between private persons through inheritance, sale, or gift.NoneTransfers between:
• Direct descendants0.5
• Second-degree relatives1.0
• Third-degree relatives2.0
• Other land and houses3.0
• Undeveloped land4.0
2.2Land taxAnnual tax levied on land area. Tax is collected from January to end-April.



Taxable land is divided in two categories:



• Occupied land (i.e., land occupied by buildings and factories)



• Agricultural land
• Land occupied by temples, public welfare buildings, embassies, and housing for disabled persons (for extensions of less than 5,000 sq km).



• Agricultural land, not exceeding two hectares per family, occupied by disabled military personnel and civilians.



• Agricultural land situated in mountainous areas yielding less than 150 kg rice per person per year.



• Agricultural land affected by natural disaster or other damages in accordance to the damage.



• Newly cleared rice fields in mountainous (5 years) and flat land (3 years).



• Industrial orchards (2-3 years).
1. Occupied land:

Rates vary from kip 5 to kip 300 per square meter per year in accordance with the use (housing, production factories, business or service and unused open land) and location.



2. Agricultural land:

Rates vary from kip 20,000 to kip 45,000 per hectare per year in accordance with: (i) land use (rice land, garden land, and farm land); (ii) location (level field and mountainous areas); and (iii) type of production (for rice, number of crops per year and for garden, type of trees).
3.Taxes on goods and servicesThe tax is collected from imports of goods to the Lao P.D.R, first time sale of imported goods or domestically produced products, and general services



Importers, producers or servers who operate sales or services inside the Lao P.D.R. and have paid the initial tax (e.g., at customs checkpoints) shall have the right to get a deduction of initially paid turnover tax. Deductions are not allowed for service charges, purchases of transport vehicles, including accessories and spare parts which are not used directly by the companies, and purchases of consumer goods for personal utilization by the company.



All imports, not exempt from import duties, are subject to turnover tax and the base of taxation is customs value, plus customs duty, plus excise duty, if any. In case of the first time sale of goods imported or manufactured inside the country, that tax shall be calculated during its selling or delivery by importers or domestic manufacturers. The calculation shall be based on the actual sales amounts without turnover tax.
The following activities are exempt from turnover tax:



• Import of crop seeds, animal breeds, and insecticides.



• Import of materials, instruments and chemical components for research purposes.



• Import of gold for the notes issuing institution.



• Import of bank notes or coins.



• Import or activity relating to tax or post stamps.



• Import of planes and instruments for international air transportation.



• Import of goods or accessories for components of international air transportation.



• Import of goods for selling to diplomats and international organizations in the Lao P.D.R. according to permissions of Ministry of Foreign Affairs.



• Import of goods with tax exemption or temporary import.



• Import and sales of animal treating medicines.



• Sales of self-produced agricultural products by peasants.



• Forestation activities, industrial trees and fruits planting.



• Sales of agricultural and handicraft products by government employees or cooperative members on family basis or limit.



• Export of goods and services.
The turnover tax is levied at 5 percent and 10 percent differently from domestic production and services or importation.



Illustrations of items subject to these rates follow:



• Fertilizers, animal feeds, rice bran and rice polish, cotton thread, silk thread, and other yarn.



• Food stuffs including food ingredients, crudely rice, barley rice, tools and accessories for fishing and fish farming, education materials, instruments for sports and fiscal training, and toys for children, bicycles, tricycles, any types of fuel, motor oil, brake oil, tobacco leaves.



• Harvested products, trees spout and livestock, rice and unprocessed rice.



• Raw material, semi-processed products, agricultural chemicals, industrial and handicraft production, machines and equipment used in agricultural, industrial and handicraft production, machines and equipment for discovering, mining of mineral, oil and natural gas, and basic infrastructure construction such as bridges, roads, irrigation, dams and airport s including their spare parts.
Tax Rate



Domestic



Production
(In percent)



Importation
3.1Turnover tax
Exempted5
Exempted5
Exempted10
55
The tax on services shall be calculated after completion of the work. The calculation shall be based on the actual service charges without turnover tax.







Turnover tax declarations must be submitted monthly and turnover tax collected must be paid monthly (turnover tax on imports is collected at custom checkpoints). All purchase and sales must be substantiated by tax invoices.
  • Sales of allowed text books.

  • Newspapers and magazines.

  • International transportation and relevant services (international transportation—transportation of passengers or cargoes from abroad or to abroad by land, air, and sea/river).

  • Transport by people, animals, and boats without engines.

  • Provision of leasing immovable properties, such as land, houses, and others by persons who do not have business activities.

  • Export services.

  • Independent job-occupation by one’s own labor.

  • Educational activities: child schools, primary schools, secondary and high schools, universities, and technical schools.

  • Activities for public benefits held by government authorities and international organizations; and banking and insurance activities.

  • Rice, unprocessed rice, and rice bran domestically produced.

  • Domestically produced: Fertilizer, animal foods, and rice polish.

  • Wheelchairs (for disabled people)

  • Fire trucks, ambulance, and specific vehicles for the government, national defense, and security purposes.

  • Unreal human and animal organs for medical.

  • Clothes, hat, shoes, belt (except those made by silver or gold) and umbrellas, silk and other yarn made products, sewing machines and its components, medicaments medical accessories and electric power, unrecorded cassette and compact disk s, and electric tools and instrument, ores, glue-stone, lignite, coal, gas and similar others.

  • Agricultural products e.g. rice flour, manioc and maize flour, and other flour.

  • Art and craft products, communication instruments including spare parts, wooden coal and fire-wood, tea and coffee made products, ships, motor boats for domestic transportation or tourism purposes.

  • Suitcase, travel bags handbags and other similar products, house furniture, watches, glasses, product for body cleaning, perfume and cosmetics, general office supplies, tool and components for water supply, pure drink water, soft-drinks, non-alcoholic drinks, lump-ice and ice cream, electric household supplies (e.g. fridge, washing machines, cookers, etc.).

Tax Rate(In percent)
DomesticImportation
Production
510
Exempted10
510
510
  • Air conditioners and their spare parts, TV sets, VDO-cameras, VCD-players and similar others including spare parts and components, musical instrument and its components.

  • Billiard and snooker tables, football tables other games machines, construction materials and instruments. Play cards and other similar plays, beer, wine, alcohols and alcoholic drinks, cigarettes and other tobacco products.

  • Precious metal and glass, wood and rattan-made products, sport motor boat, vehicles, motorcycles and their spare parts, fireworks, explosive materials for construction, sport and air-compressed guns.





Services



  • Agricultural service with machines, analysis of agriculture, forest and construction soils, ores, development of land for cultivation and cattle-breeding purposes, medical treatment for human and animal, massage, slaughter-house and animal killing activity, printing and publication activity, municipal sanitation, decorating, golden and silver hand-made product making, advertising, survey and study, planning, analysis of data and information, accounting, law engineering and architectural consultancy, concert, art play, opera and cultural events, sport activities, tailoring and dresser’s salons, photo and sewing shops, hairdressing salons and barber shops, and dress washing salon.

  • Soil and land loading service, development of land for construction purpose, exploitation of forest and non-forest products, wood-sawing mills, wood and rattan manufacturing plants, tobacco-leave drying mills, security, post and transport service, diamond, jewel and glass processing, brokerage, snooker and billiard business, activity of movies and video screening recording of video, conducting leasing business.

Tax Rate(In percent)
DomesticImportation
Production
1010
510
5
10
3.2Excise duties
• Market management service, construction of road bridge, irrigation, dam, ports and airport, general construction, installation and repairs, development of land and construction houses for sales, telecommunication service, hotel, guesthouse, resort tourism and restaurant activities, entertainment activities (night club, discotheque, karaoke), and lottery activity.10
Levied equally on imports and domestic supplies of petroleum products and selected consumer goods. Imported items are subject to tax on customs duty-inclusive values while domestic suppliers are subject to tax on ex-factory costs.The following are exempt:
  • Purchases by embassies and international organizations.

  • Kerosene.

  • Alcohol (90) for medical purposes.

  • Purchases of petroleum products for externally-funded projects.

  • Exports of excisable goods.

The ad valorem excise duties are as follows:
Item
Petroleum products:
Premium gasoline25
Regular gasoline24
Diesel12
Kerosene10
Hydraulic, brake, lubricating, and grease oil5
Item
Alcohol:
All types with 15 proof and more70
All types with less than 15 proof60
Beer50
Cigarettes and cigars55
Cosmetics and perfumes30
Playing cards, and the like70
Vehicles-cars:
Pickup with two doors20
Pickup with four doors25
Minibus with less than 15 seats25
Bus20
Jeep with soft top30
Jeep with hard top less than 2.000 cc65
Jeep with hard top 2.001-4.000 cc70
Jeep with hard top more than 4.000 cc75
Cars less than l.000cc60
1.000-1.500cc65
1.501-3.000cc75
Morethan 3.000cc90
Motorcycles20
Speed boats, motor boats for sport activities, including their motor and accessories10
Miscellaneous items:
Electrical appliances such as: air-conditioners, satellite TV signal receivers, audio-video, cameras, audio-video recorders, musical instruments, including components and accessories.15
Freezer, heater, washing machine, vacuum cleaners.10
Billiard and snooker tables, football game tables and other game machines, service activities of billiard and snooker, bowling, and lottery.20
Activity of night club, discotheque and karaoke.25
3.3Tax registration licenseLevied annually on registered industrial and commercial enterprises, based on turnover and on import-export enterprises, based on capital. Payable during the first three months of the year on a current basis.NoneDifferent rates apply to enterprises producing for the local market and import-export enterprises.
Turnover Rates applicable to local enterprises
(In million of kips)(In kip)
120.0
>12-3010,000
>30-8015,000
>80-20030,000
>200-50050.000
>500-l,50070,000
>l,500-2,000100,000
2,000 and above150,000
CapitalRates applicable to import-export
(In million of kips)(In kip)
200-500200,000
500-1.500300.000
1,500-2,000400,000
200 and above500,000
3.4Road taxLevied annually on all motor vehicles (motorcycles, cars, trucks, etc.)The following are exempt:
  • Government cars.

  • Cars of the diplomatic corps, international organizations, and foreign experts.

Fees vary according to size of engine (for cars and motorcycles), weight (for trucks), and number of seats (for buses).kip 5,000 to kip 90,000
3.5Air travel feesLevied annually for:
  • (i) Civil aviation registration

NoneFees vary according to weight.US$17-175
  • (ii) Examination issuance and renewal of permits

US$32-192
3.6Airspace overflight feesLevied on all aircraft without regard to nationality overflying the territory of the Lao P.D.R.
  • VIP special aircraft.

  • Hospital aircraft carrying patients.

US$50-360 per overflight
3.7River transport feesLevied annuallyNoneFees vary according to size of boats.kip 1.000-kip 20.000
3.8Border entry and exit fees
  • Diplomatic personnel and relatives.

  • Foreign experts and relatives.

Persons VehiclesLand and water vehicles.kip 50.000
3.9Fees for extended residence in Lao P.D.R.
  • Diplomatic corps, foreign experts, and their relatives.

Fees vary according to length of stay.kip 5,000- kip 20,000 per day
3.10Fee for temporary border passesNonekip 5,000-kip 10,000
3.11Fees on delivery of passports, visas, and laissez-passer documentsNoneFees vary according to nature of document and applicant:
  • Foreigners:

  • Lao nationals:





US$10-120



US$ 5-60
3.12Consular fees overseasLevied every five yearsNoneFees vary in accordance with the location of the consular office and type of document.US$10
4.Taxes on international trade
4.1Import dutiesUntil recently, imposed on values fixed in U.S. dollar terms. Such values were fixed for most items, jointly by the Ministry of Trade and the Customs Department. The main exceptions are motor vehicles and selected computer equipment, for which invoice values are accepted. The U.S. dollar values are converted into local currency at the market rate.Imports of diplomats and army/police are exempt. Goods imported by the government for use in externally-financed development projects are also exempt; the government otherwise pays duties on its other imports. Imports of fuel by Lao Aviation for international transport is exempt. Also exempt are imports under bilateral grants and externally-funded humanitarian imports.Six rates ranging from 5 to 40 percent. The kinds of goods subject to these rates are as follows:Tax Rate



(In percent)
Raw materials, chemicals (including fertilizers), packaging materials, some machinery (incl. tractors and tools for agriculture), and essential consumer goods (rice, wheat flour, salt, baby foods, medicines, books and printed materials), cameras.5
Imported inputs (raw materials, machinery and equipment, building materials) for approved foreign-financed private sector and joint venture investment projects are subject to an import fee of 1 percent.
Raw materials and intermediate components imported for the purpose of processing and then reexported are fully exempt from import duties. In highly exceptional cases and by specific decision of the government, foreign investors may also be exempt from the 1 percent duty rate because of the large size of their investments and the significant positive impact which those investments are expected to have upon the socio-economic development of the country.Other machinery and spare parts, and less essential goods (sugar, cheese, butter, chocolate, footwear, garments, photographic films, refrigerators, dishwashers, household electrical appliances, stereo systems, carpets, pearls and diamonds).10
Selected luxury consumer goods (premium petrol, cosmetics and toiletries, TVs and VCRs, radio cassette players, table games and fun fair articles, buses, minibuses, units).20
There are no discretionary exemptions. The Minister of Finance does not have the power to grant duty exemptions.Other luxury consumer goods (prepared meats and fish, cereals and prepared foods, white chocolate confectionery, toilet soaps and deodorants, perfumes, wines and spirits), pickup trucks.30
Currently, there is no drawback scheme for import duties paid on inputs for exports.Soft drinks, liquors, beer, tobacco, detergents, processed wood, jeeps, cars, motorbikes, cigarettes, cigars.40
4.2Export dutiesAll exported finished products produced from raw materials and intermediate components imported free of import duty under Article 17 of the Law on the Promotion and Management of Foreign Investment in the Lao P.D.R. are exempt.Electricity: 20 percent of invoice value; coffee: 5 percent of FOB value; livestock: 5 percent of FOB value; logs: specific rates; saw wood: specific rates; semi finished wood products (lumber, parquet): 30 percent of FOB value; finished wood products (plywood): 3 percent of FOB value.
4.3Transit taxImposed on “transit” vehicles shipping traded commodities between Thailand, Vietnam, and China via the Lao P.D.R.
5.Taxes on timber and other natural resources
5.1Timber royaltiesLevied as a fixed dollar amount per cubic meter of timber sold, both for domestic consumption and export. Timber royalties incorporate other taxes previously levied on timber products, i.e., the reforestation tax, the resource tax levied on the timber production rate, and the export duties, levied by the Customs department on exported timber.NoneRoyalties established by the Ministry of Commerce and the Forestry Department of the Ministry of Agriculture. The timber royalties are set year by year.
5.2Taxes on natural resourcesLevied in the form of specific duties on volume of mineral extraction, or ad valorem duties on sale price of mineral products.
  • Ferrous metals

  • Non-ferrous metals

  • Coal

  • Construction materials

  • 2 percent of sale value

  • 2-5 percent

  • 2-3 percent

  • KN 50 per 100m3

Source: Ministry of Finance.
Source: Ministry of Finance.
References

The main contributor of this chapter is Kotaro Ishi.

IMF (2007a) argued that the quality of institutions matters for fiscal policy. See also Manasse (2006) and Mehlum et al. (2006).

The assessment is based on the information made available to staff during 2007 Article IV consultation mission. A more comprehensive assessment is needed, but it will require multi-donor technical assistance missions as there are a number of highly specialized issues.

Other important resource revenues include timber revenues, which used to account for about 15 percent of total fiscal revenue. However, concerned about the sustainability of forestry resources, the government has imposed a strict limit on logging activities since 2002. In 2005/06, revenues from timber accounted for less than 5 percent of total revenue.

The fiscal year ends in September.

See Barnett and Ossowski (2003) for extensive discussions about fiscal challenges faced by non-renewable resource rich countries.

As long as a pattern of annual inflows into the reservoir follows historical patterns, the hydrological risks for NT2 are considered to be small. See Nam Theun Power Company Ltd. (2005).

At technical levels, the Ministry of Finance prepares only a simple and very aggregate MTF framework.

Taxation terms are stipulated in Mineral Exploration and Production Agreements for each concession.

See Sunley, et al (2003) for a full discussion about mineral taxation.

Main policy recommendations in this section are based on IMF (2005a and 2007a). For a review of institutional framework in resource-rich low-income Asian countries, see IMF (2007b).

See for example, Barro 1991.

See Barnett and Ossowski, 2003.

This scenario is consistent with proactive policy response discussed in the staff report.

A typical spending approach widely used in other resource rich countries include the one based on permanent income of resource revenues. However, results from this approach are subject to large variability dependent on a choice of discount rate, interest rate, and size of potential resource wealth.

The domestic balance is defined as the overall balance net of grants and externally-financed capital expenditures, and the non-resource domestic balance is defined as the domestic balance net of resource revenue.

This scenario is consistent with reactive policy response discussed in the staff report.

Other Resources Citing This Publication