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.