Lao People’s Democratic Republic: Technical Assistance Report-Government Finance Statistics and Public Sector Debt Statistics

This technical assistance (TA) report on government finance statistics (GFS) covers the remote TA to the Ministry of Finance (MOF) during September 21–October 2 and December 14–18, 2020 and March 9–13 and April 19–23, 2021 (which was extended to May 2021). These peripatetic activities were conducted remotely due to the travel restrictions resulting from the COVID-19 situation. This report documents the main achievements from these activities. These activities were part of the GFS and Public Sector Debt Statistics (PSDS) project funded by the Government of Japan (JSA3) and implemented by the IMF Statistics Department (STA) and the IMF Capacity Development Office in Thailand (CDOT).

Abstract

This technical assistance (TA) report on government finance statistics (GFS) covers the remote TA to the Ministry of Finance (MOF) during September 21–October 2 and December 14–18, 2020 and March 9–13 and April 19–23, 2021 (which was extended to May 2021). These peripatetic activities were conducted remotely due to the travel restrictions resulting from the COVID-19 situation. This report documents the main achievements from these activities. These activities were part of the GFS and Public Sector Debt Statistics (PSDS) project funded by the Government of Japan (JSA3) and implemented by the IMF Statistics Department (STA) and the IMF Capacity Development Office in Thailand (CDOT).

Summary of Mission Outcomes and Priority Recommendations

1. This technical assistance (TA) report on government finance statistics (GFS) covers the remote TA to the Ministry of Finance (MOF) during September 21–October 2 and December 14–18, 2020 and March 9–13 and April 19–23, 2021 (which was extended to May 2021). These peripatetic activities were conducted remotely due to the travel restrictions resulting from the COVID-19 situation. This report documents the main achievements from these activities. These activities were part of the GFS and Public Sector Debt Statistics (PSDS) project funded by the Government of Japan (JSA3) and implemented by the IMF Statistics Department (STA) and the IMF Capacity Development Office in Thailand (CDOT).

2. The main purpose of the extended remote TA for April-May 2021 was to continue assistance to the Fiscal Policy and Law Department (FPLD) with:

  • (i) making assessment of Lao’s progress in compiling and disseminating GFS and PSDS data in line with international standards;

  • (ii) discussing with the Fiscal Policy Law Department (FPLD) a medium-work plan for FY2021-FY2022, placing high priority on improving the accuracy, timeliness, and coverage of GFS and PSDS compilation.

Please see Appendix I on the work plan for FY2021-FY2022.

3. During seven months from September 2020 to March 2021 following the July 2020 remote GFS TA mission, progress was slowed by the work disruptions due to the pandemic. Nonetheless, despite significant challenges at the MOF, frequent contacts remotely with the Lao MOF for nine months have resulted in the following achievements:

  • (i) Preliminary Quarterly GFS for FY2020 for budgetary central government was compiled based on budget execution data and shared with the APD Lao team for surveillance and reported to the STA1;

  • (ii) Quarterly GFS for Social Security Fund (SSF) for Q1 and Q2 of FY2020 based on SSF operational data (above-the-line data and financial assets and liabilities) was compiled; and

  • (iii) The FPLD updated the mission on progress on the establishment of the Oil Fund, expected to operate in FY20222. A Presidential Decree for the Oil Fund is expected to be submitted to the Prime Minister’s Office in the second half of 2021 for approval once it is finalized by the relevant ministries, mainly the MOF and the Ministry of Commerce. Based on the preliminary information of the draft Decree and discussions with the FPLD at the remote meetings, the Fund should be classified as an extrabudgetary fund under the GFSM 2014.

4. In a continuation of the peripatetic work with Lao officials, the extended remote TA for April-May 2021 continued focusing on compilation of quarterly GFS and PSDS, including arrears data by the Lao Government and SOEs, based on latest available and recently-extended-coverage data.

5. The DDG supported the proposed work program and objectives, which focus on: (1) upgrading GFS and PSDS compilation and dissemination and deepening coverage by focusing on extrabudgetary funds and nonfinancial public corporations; (2) strengthening coordination between FPLD and MOF departments on financing data sharing and reconciliation to improve GFS accuracy; (3) enhancing synergies between PFM and GFS work programs. Despite significant challenges caused by the COVID-19 pandemic work environment, this TA achieved the following:

  • (i) Quarterly GFS for FY2020 for budgetary central government was finalized; these data series were compiled based on the Budget and the National Treasury Departments final reports. The GFS data were reviewed by the LTX for accuracy and subsequently shared with the APD Lao team and the STA.

  • (ii) Quarterly GFS for SSF for Q3 and Q4 for FY2020 based on SSF operations data (above-the-line data and financial assets and liabilities) was reported to the STA3.

  • (iii) Compilation of quarterly PSDS will be initiated by the External Finance and Debt Management Department (EFDMD) in early 2022 or sooner if feasible4. The mission was informed by the EFDMD that there were no arrears on external borrowing, except the delay in repayment due to technical reasons. The ongoing Debt Management and Financial Analysis System (DMFAS) upgrade and trainings (basic and advanced) for all MOF staff are expected to be finished in early 2022.

  • (iv) The MOF Annual Debt Bulletins for FY2019 and FY2020 were prepared and published on the MOF website in May 20215.

  • (v) The State-Owned Enterprises (SOEs) reform6 (development strategy) has been developed by an inter-ministerial committee and will be submitted to the Government in the second half of 2021. Progress of the strategy, identification of nonfinancial SOEs for GFS and related data reporting on SOEs arrears will be discussed with the State-Owned Enterprises Management Department (SOEMD) in the next remote GFS TA.

All the achievements after the March-August 2020 remote GFS TA mission are summarized in Appendix II.

6. In Lao PDR, fiscal measures to deal with the Covid-19 pandemic are being implemented under the current annual budget for FY2021 (Jan-Dec) which was approved by the National Assembly (NA) in December 2020. The MOF is planning the annual budget for FY2022 including Covid-19 budget. It will be submitted to the NA in Oct-Nov 2021. Since the budget for Covid-19 response is incorporated in total annual budget, it may not be feasible to itemize Covid-19 related spending in the current fiscal data reporting system. Nevertheless, the FPLD agreed with the LTX on monitoring Covid-19 related spending under FY2021 and FY2022, thus data collection on this matter will be discussed in the future remote GFS and PSDS TA, including the June remote TA.

Table 1.

Priority Recommendations

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Detailed Technical Assessment and Recommendations

A. Updated Action Plan

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B. Regular Data Compilation and Timely Data Dissemination to IMF and on the MOF Website

7. Lao P.D.R. quarterly GFS is compiled from preliminary data submitted by other departments within the MOF and the Bank of Laos. The most recent quarterly GFS has been reported to the IMF with improved timeliness compared with substantial delays in the past.7 The recent progress in the timeliness of data compilation and submission to the IMF is due to strengthened coordination between the FPLD and data providers. Data provision schedule were agreed between FPLD and reporting departments, providing the preliminary data, to allow the FPLD to compile quarterly GFS for more timely reporting to the IMF. Preliminary data would then be revised once actual data become available.

8. Quarterly GFS for FY2020 were compiled by the FPLD with support of the LTX based on final budget execution data and shared with the APD Lao team. Quarterly and annual GFS for FY2010-FY2019 in the template of GFSY were disseminated on the MOF website in June 2020. These statistics were based on final reconciled budget execution data of the Budget and National Treasury Departments, which also were disseminated on National Summary Data Page (NSDP) in the IMF Bulletin Board8.

Recommended Actions:

  • Strengthen coordination with the relevant source data reporting departments of the MOF, and with the Bank of Laos on timely data sharing to ensure regular compilation of Lao P.D.R.’s GFS using preliminary accounting data. This would also facilitate timely statistics submission to the IMF and regular dissemination on the MOF website.

C. Broadening the Institutional Coverage of GFS

9. The FPLD initiated compilation of quarterly and annual GFS for the SSF from FY2018 (Jan-Dec) onwards based on monthly SSF operational data (above-the-line data and financial assets and liabilities) provided by the National Social Security Fund (NSSF). Annual GFS for FY2018 for the BCG and the SSF was reported to the IMF for publication in the GFSKand disseminated on the MOF website in June 2019. The SSF data were classified according to the GFSM 2014 classification codes and compiled with support of the LTX.

10. The FPLD examined existing government funds with support of the LTX, to classify them either as extrabudgetary funds or as part of budget expense. Three extrabudgetary funds have been identified in the previous missions, namely, the Environment Protection Fund (EPF), the Poverty Reduction Fund (PRF), and the Embassy Support Services9. The FPLD, with support of the GFS-LTX, initiated discussion with the PRD in January 2020 to collect data available of the PRF’s operations to compile GFS. Financial Statements (FS) for FY2018 were provided to the FPLD in the January 2020 GFS TA mission and items in the FS 2018 were clarified with the PFR for proper classification during this extended remote TA for July-August 2020 to compile annual GFS for the PRF, and the clarification work is on-going. The FPLD also requested the PRF to provide FS2019 to compile annual GFS for the PRF.

11. An Oil Fund, to be implemented within FY2022, will also be off-budget. An Inter ministerial Committee comprising relevant ministries, including the Prime Minister’s Office (PMO), Ministry of Commerce, and the MOF, was organized to discuss the scheme, the operations and management of the Fund, and has been put in charge of drafting the Presidential Decree establishing the Oil Fund, which will be submitted to the PMO within the second half of 2021.

12. The Deputy Director General (DDG) of the FPLD requested the LTX to identify more government funds managed by line ministries (especially energy, mining, agriculture sectors) which are not covered by the Lao state budget. Transactions made through the funds and funds’ accounts information have not been reported to the MOF.

13. The FPLD has agreed with the workplan as recommended by the remote mission during April-May 2021 to compile GFS for the consolidated nonfinancial public sector, where public nonfinancial corporations will cover major SOEs, within 2022. According to the SOEMD, the SOEs reform (development strategy) is being developed by an inter-ministerial committee and expected to be submitted to the Government in the second half of 2021. Progress of the strategy will be followed up in the future remote TA. The SOEMD agreed with the FPLD and the LTX to provide the latest list of large SOEs, both before and after the reform, including data (registered capital, balance sheets and profit and loss statements) of selected major SOEs for GFS compilation. As the next step, the FPLD will initiate discussions with parent ministries and the MOF’s SOEMD on collecting detailed information, financial statements, and other data for delineation of major SOEs by nonfinancial public corporations or part of central (general) government to produce a final list of the major SOEs.

Recommended Actions:

  • Continue following up on progress of the Oil fund and collect data on transactions made through the fund by agreeing with the relevant ministry for the purpose of compiling GFS once the Fund is implemented.

  • Continuing collecting financial statements of three identified extrabudgetary funds, with the aim of compiling quarterly or annual GFS for these extrabudgetary funds.

  • Identify funds managed by line ministries in response to the FPDL’s request, through coordination with these ministries and collect data on transactions made through these funds.

  • Collect data and information from line ministries and relevant SOEs to identify the major SOEs based on “macro-critical” SOE approach for financial impact and to delineate them for proper classification.10

D. Compiling Annual GFS for Dissemination in the Official Gazette and on the MOF Website

14. The FPLD initiated compilation of summary data on GFS basis of the detailed annual budgetary execution data (official gazette) from FY2017 (January-December) data as indicated by the DG of the FPLD at the CDOT Advisory Committee meeting in 2018. Annual GFS for FY2018 (latest data) based on the detailed data was compiled during these remote TA. These detailed data will be used for cross-examining data accuracy of annual GFS compiled based on current secondary source data. The detailed annual GFS is expected to be disseminated upon the DG approval of the FPLD.

15. Official gazette data is compiled based on budget nomenclature and include aggregated data, such as in ODA funded capital expenditures as source data are recorded by project or by sector basis by the Ministry of Planning and Investment (MPI). There is economic classification in budget funded capital expenditures as it is recorded and managed according to budget nomenclature, while there is no detailed economic classification in ODA funded capital expenditure. Detailed data on ODA funded capital expenditures need to be collected from the MPI and will be examined how they can be compiled into annual GFS based on the GFSM 2014.

16. Detailed annual budgetary execution data for FY2020 was prepared by the Budget Department based on detailed source data submitted by line ministries and provinces and will be submitted for an audit and reported to the NA in June/July 2021 after the Minister’s approval. according to the Budget Law. Thus, the official gazette data for FY2020 will be published in early July.

Recommended action:

  • Compile annual GFS in bridge tables based on data in a summary table of official gazette for FY2019 once it is available and disseminate on the MOF website by coordinating with the IT Department.

  • Initiate discussion with the MPI, with cooperation of the CDOT PFM Advisor, to agree on data sharing arrangement to collect detailed source data of ODA funded capital expenditure to compile GFS according to economic classification under the GFSM 2014.

E. Regular PSDS Compilation for Dissemination and Data Collection of Arrears on the Lao Government and SOEs

17. The EFDMD agreed with the FPLD and the LTX in the November 2019 GFS TA mission on compiling quarterly PSDS from FY2018 based on the PSDS template revised several times to reflect their requests and using the EFDMD source data.11 These data would be compliant with the guidelines of the PSDS Guide 2013 and the reporting formats of the World Bank (WB)-IMF PSDS database.

18. There has been a delay in the compilation of recent quarterly PSDS due to multiple reasons, including an increased workload of the MOF staff working on the responses to funding problems of the Government. The FPLD was continuing to follow up with the EFDMD on progress of compilation of quarterly PSDS based on their agreement.

19. Compilation of quarterly PSDS will be initiated in early 2022, or sooner if feasible, and disseminated on the MOF website, subject to the Minister’s clearance. In response to the continued engagement and discussion by the LTX with the EFDMD and the FPLD, the EFDMD presented at a remote meeting in the extended GFS/PSDS TA for April-May 2021 that the quarterly PSDS would be reported to the IMF once the ongoing DMFAS system upgrade and training (basic and advanced) for all MOF staff are finished (expected in early 2022). Aside from the PSDS, the MOF’s Annual Debt Bulletin for FY2019 and FY2020 were published by the EFDMD on the MOF website in May 2021.

20. The mission was informed by the EFDMD that there were no arrears on external borrowing by the Lao Government, except for the delay in repayment due to technical reasons. There are two types of SOEs: EDL (electric power generation company), able to borrow directly from external lenders, and other SOEs, able to borrow only from the Lao Government (on-lent from the government). EDL’s external borrowing is guaranteed by the Government. Data reporting on SOEs arrears and other types of corporations, including PPP controlled or owned by the Government will be discussed with the SOEMD in the next remote GFS TA.

Recommended Actions:

  • Compile quarterly PSDS in early 2022 or sooner if feasible based on the PSDS template using available source data and, in due course, compile a time series of back data as much as feasible. Compile partial data of public sector debt data until completion of quarterly PSDS based on the PSDS template will be initiated.

  • The EFDMD should disseminate quarterly PSDS on the MOF website once it is compiled and is strongly encouraged to disseminate quarterly PSDS on the WB/IMF debt database (within two quarters) in compliance with the guidelines of the Enhanced General Data Dissemination System (e-GDDS) reporting.

F. Tracing Covid-19 Related Spending Under Annual Budget for FY2021 and FY2022

21. In Lao PDR, fiscal measures for Covid-19 pandemic are being implemented under current annual budget for FY2021 (Jan-Dec) which was approved by the National Assembly (NA) in December 2020. An Inter-ministerial committee, comprising the MOF, the Ministry of Health, the Ministry of Welfare and other relevant ministries, was organized in 2020 to implement fiscal measures for Covid-19 response.

22. Annual budget for FY2022 including Covid-19 budget is being drafted by the MOF and will be submitted to the NA in Oct-Nov 2021.12 Fiscal measures for Covid-19 response is incorporated seamlessly into total annual budget It is necessary to discuss with relevant departments how to collect Covid-19 spending data from the current budget reporting system or from other source. The FPLD agreed with the LTX on continuing discussion on the way to trace and monitor Covid-19 related spending under FY2021 and FY2022 annual budgets.

23. Fiscal measures for Covid-19 response expected in annual budget for FY2022 include the following:

(i) Expenditure measures: (a) welfare supports to company (SSF members) employees from SSF. The Lao Government will collect the information on affected families and company employees, unsupported by SSF, in the region by Covid-19 pandemic to provide support from the Budget. (b) 15% of central budget and 10% of local budget will be cut and non-urgent expenditure implementation will be postponed. (c) These expenditure measures are financed from Reserve fund (State accumulation fund etc.), external grants and domestic grants (from private companies and individuals).

(ii) Revenue measures: (a) profit tax payment will be deferred for 6 months, and (b) personal income tax (personal income tax not exceeding Kip 5 million and for small business) for three months equivalent will be exempted.

Recommended Actions:

  • Coordinate with relevant departments including the Budget Department in the reporting system and/or the Inter-ministerial Committee to collect data for Covid-19 related spending for tracing and monitoring the spending.

  • Prepare quarterly report on Covid-19 spending based on the template to be developed with support of the LTX and report to IMF.

Appendix I. A Work Plan for FY2021/FY2022 (Agreed by the MOF)

GFS work remains to ensure regular GFS with high frequency and Public Sector Debt Statistics (PSDS) compilation, regular and timely reporting, improvement of data accuracy, expansion of coverage and sectorization, and regular and timely data dissemination. The following GFS TA work will be conducted with support of the CDOT GFS-LTX.

1. Continuing compilation of quarterly and annual GFS on a timely basis with improved consistency and disseminating to IMF and on the MOF website.

(i) Quarterly and annual GFS for consolidated central (general) government (budgetary central government and the Social Security Fund (SSF)) based on budget execution data and SSF operations data.

(ii) Annual GFS based on summary data of detailed official gazette data compiled according to the Chart of Accounts (CoA).

2. Improving quality and timeliness of GFS, particularly financing and public debt data through implementation of better data sharing and reconciliation between the FPLD and the source data providers.

3. Expanding the coverage for GFS by consolidation with extrabudgetary funds including the Oil Fund1.

4. Compiling quarterly PSDS based on the WB/IMF PSDS debt database and the PSDS 2011 guide and disseminate to IMF and on the MOF website in line with the e-GDDS2. Identifying any public sector debt arrears by government or State-owned Enterprises (SOEs)3.

In a short-and Medium-term:

5. Compiling GFS for selected major nonfinancial SOEs after their proper delineation (central/general government or public corporations) by sector and establish reporting requirements4.

6. The FPLD would actively work with Treasury Department and IT Department and other MOF departments in building the IFMIS system5 that includes GFSM and COFOG classifications for automation of fiscal reporting (on-going work by the COA Technical working group of the MOF on chart of accounts (COA) development under the WB project and the COA Modernization Project by the CDOT PFM team), supported by the CDOT’s GFS and PFM LTXs through their better coordination.

Appendix II. GFS/PSDS TA Work and Achievements

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Appendix III. Quarterly GFS for Budgetary Central Government

(in millions of Kip)

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Appendix IV. Annual GFS for Budgetary Central Government

(in millions of Kip)

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1

A historical annual and quarterly time series from FY2010 to FY2019 was published on the MOF’s website on June 17, 2020 (https://www.mof.gov.la/index.php/publications-and-statistics_la/).

2

According to a draft Decree of the Oil Fund, it aims to stabilize retail prices of fuel products through price adjustments either by providing subsidies from the Oil Fund (with increases in world fuel prices) or by replenishing the Oil Fund (with decreases in world fuel prices).

3

SSF is operated by social benefit contributions, own revenue and transfers from the Lao Government. Quarterly GFS for consolidated central government (BCG and SSF) will be compiled after the Government disbursements for National SSF operations are clarified by the Budget Department.

4

The EFDMD is planning to compile Q-PSDS from Q3 (Jul-Sep) 2022 in PSDS templates but is willing to start sooner using partially available data.

6

The strategy covers legal framework, restructuring and privatization, and other relevant issues, and is applicable to (a) all SOEs and (b) private-public partnerships (PPP) and (c) other companies that have Lao Government minority shares. Detailed work on compilation of GFS for nonfinancial SOEs is expected to be conducted after the SOEs reform is implemented.

7

The delay in data compilation and reporting to the IMF was due to multiple reasons such as delays in source data submissions from data providers to the FPLD; frequent source data changes and revisions mainly by the Budget and Tax Departments; verification work of the source data by the FPLD; and limited staff in the FPLD engaged in data compilation work.

8

Quarterly and annual GFS for FY2020 and annual budget execution data for FY2020 are expected to be disseminated on the MOF website and on the IMF NSDP in July 2021.

9

It is under the Ministry of Foreign Affairs which provides to the foreign embassies in Lao PDR various services including housing rent. It is expected to be included in the MOFA as one of their departments in the next few years. It is operated by their own revenue and grants from the Lao Government budget.

10

Major SOEs will be selected according to size of assets, debt, and subsidies; use of government guarantees; strategic importance (e.g. natural resources, utilities), and other relevant criteria (“macro-critical” SOE approach).

11

Domestic debt (debt securities and domestic borrowing) and foreign debt (foreign borrowing) are managed by the Treasury Department using the DMFAS system. With current data availability, the following debt instruments and institutions will be covered by quarterly PSDS: (i) debt securities (issued in Lao PDR and overseas) and foreign borrowing; and (ii) the SOEs’ Domestic borrowing from the Lao PDR Government. Due to reorganization in the MOF in 2017, data management on domestic debt securities was transferred from the National Treasury Department to the EFDMD.

12

A Presidential Decree or a Ministerial Degree on fiscal measures for FY2022 including Covid-19 measures is expected to be issued in October 2021.

1

The Oil Fund is expected to be implemented in FY2022.

2

After DMFAS system upgrade and all the training (basis and advanced courses) are finished in 2021 and 2022, respectively, the EFDMD will compile quarterly PSDS from Q3 (Jul-Sep) 2022 and onwards. The EFDMD is requested to start quarterly PSDS compilation work soon after the trainings are completed.

3

There are no arrears on external borrowings, except the delay in repayment due to technical reasons.

4

Major SOEs will be selected according to size of assets, debt, and subsidies; use of government guarantees; strategic importance (e.g. natural resources, utilities), and other relevant criteria (“macro-critical” SOE approach). SOEs development strategy will be developed by an intergovernmental committee and is expected to be submitted to Lao Government in 2021. Once the reform is implemented, the FPLD with cooperation of the SOED and the CDOT GFS/PSDS Advisor, will initiate work for compilation of GFS for nonfinancial SOEs.

5

The IFMIS system is expected to be implemented in FY2023.