2008 FISCAL TRANSPARENCY REPORT FOR LAOS

UNCLAS VIENTIANE 000164

SIPDIS

SIPDIS

STATE FOR EAP/MLS BESTIC
STATE FOR EEB/IFD/OMA SNOW
STATE FOR EEB/IFD/OMA FIGUEROA
STATE FOR EAP/RSP ARCHEA
STATE FOR EAP/EP MATHUR
STATE PASS USTR FOR BISBEE
COMMERCE FOR HP PHO

E.O. 12958: N/A
TAGS: ECON EAID PREL LA
SUBJECT: 2008 FISCAL TRANSPARENCY REPORT FOR LAOS

REF: STATE 16737


1. Following is the 2008 fiscal transparency report for Laos, as
instructed in reftel.

The Lao Government (GOL) budget, a summary of revenue and
expenditure for the current fiscal year, and a projection for the
following fiscal year are generally published by the Ministry of
Finance (MOF) in March or April. A new budget law promulgated in
early 2007 sets a 12 month fiscal year from October 1 to September
30th. The GOL publishes the budget in hard copy, which is available
for a $15 fee. It is not yet available via the internet. Quarterly
data on revenue and expenditure performance during the fiscal year
are provided to the IMF. According to the MOF, all revenues and
expenditures are included within the publicly available document.
Midyear performance, as well as a detailed presentation on the
previous year's budget, is reported by the MOF to the National
Assembly in June. Some details on revenue and expenditures are also
provided in the Minister of Finance's Mid-term Review of the Budget
Speech.


2. The accuracy of the budget is difficult to assess. The central
government relies upon provincial and local officials to accurately
transmit proper figures. The GOL is working to improve its
financial management systems and centralize revenue previously
collected by the provinces and then passed to the central
government. As the country remains a communist one party state,
with a weak central government and rising corruption, improving
fiscal transparency will be difficult. For example, the authority
of the MOF can be countered by a directive from the Politburo or the
President's Office, although the close observation of macroeconomic
policy by the IMF and World Bank discourages such interventions.
Additionally, the state audit organization was given autonomy from
the Prime Minister's office in July 2007 with the passing of a new
audit law.


3. There are no USG-sponsored bilateral programs in this area. The
only bilateral financial-sector contacts between the USG and the GOL
are in the areas of counter-measures against terrorist financing and
counterfeiting. The GOL has been forthcoming on those issues, but
lacks the capacity, human and technological, to keep very close tabs
on transactions. The USG supports the activities of the IMF, World
Bank and ADB to condition some assistance on greater transparency,
efforts which are having a measurable effect on GOL procedures. The
World Bank is currently funding a Public Expenditure Management
Strengthening Project to improve the Government's ability to track
revenue and expenditures. World Bank officials have observed that:
(i) revenue targets have been achieved, even for tax revenues; (ii)
there is significant budget discipline as measured by the difference
between budgeted and actual expenditures, even for utilities; and
(iii) the state audit organization has substantially increased its
sectoral performance type audits. Additionally, the state audit
organization has subscribed to the audit peer review with New
Zealand, which should help strengthen capacity further. The IMF is
not currently reporting on Laos' compliance with standards and codes
covering fiscal transparency.