LAO PEOPLE S DEMOCRATIC REPUBLIC Peace Independence Democracy Unity

LAO PEOPLE’S DEMOCRATIC REPUBLIC Peace Independence Democracy Unity Prosperity FY 2006/07 Fiscal Performance and Targets for FY 2007/08 By: Mr. Phoukham SOULAT Senior Official of Budget Department

Presentation Outlays Background of Country’s Public Financial Management (PFM) l Fiscal Performance in FY 2006/07 and Budget Plan for FY 2006/07 l Measures to improve Fiscal Management l Progress on PEMSP implementation l 2 28 November 2006 Fiscal Perfomance & Outlook

FY 2006/07 Budget Execution Domestic Revenue collection exceeded the target by 10% reaching 5, 306 billion kip; l Total expenditure for the FY 2005/06 was 8, 306 billion kip or 21. 7% of GDP; l The total budget deficit was about 5% of GDP l 3 28 November 2006 Fiscal Perfomance & Outlook

FY 2006/07 Measures to Improve Budget Performance Training and advice on Tax and Customs Laws implementation l Intensified administration of tax collection from all business units l Budget execution based on the priorities set and other emergency expenses l Civil servants’ salaries disbursed regularly l 4 28 November 2006 Fiscal Perfomance & Outlook

Overall Fiscal Directives Diligently strive toward fiscal self-reliance l Build up strengths gradually l Integrate the budget plan with the Sixth Five-Year Plan (2006 -10) l Continue to maintain macro-economy Stability l Facilitate further international integration l 5 28 November 2006 Fiscal Perfomance & Outlook

FY 2007/08 Budget Targets Total revenue is projected to be 7, 069 billion Kip, in which domestic revenue is 6, 030 billion kip. l Total expenditure is projected to be 8, 884 billion Kip l The budget deficit is projected to be about 1, 815 billion Kip, equal 4. 2 percent of GDP l 6 28 November 2006 Fiscal Perfomance & Outlook

Measures to Achieve FY 2007/08 Budget Targets Improve revenue collection and the effective execution of expenditures l Reduce internal deficits l Continue to improve financial agencies at all levels l Resolve problems concerning negative phenomena in the financial sector l Promote the private sector l 7 28 November 2006 Fiscal Perfomance & Outlook

Revenue Implementation Measures (1) Taxes l l l 8 Continue to disseminate the revised laws Conduct nation-wide survey to ensure enterprises fully report income & pay taxes Encourage all businesses to maintain necessary accounts Modernize tax administration The National Assembly has approved the VAT Law in December 2006 28 November 2006 Fiscal Perfomance & Outlook

Revenue Implementation Measures (2) Export and Import Taxes Instructions on customs declarations according to invoices will be drafted and implemented this year l Customs administration will be modernised l The customs Department will intensify monitoring of customs officers nation-wide l A committee will be set up to investigate smuggling cases l 9 28 November 2006 Fiscal Perfomance & Outlook

Revenue Implementation Measures (3) State Property Revise law and regulations related to the transformation of property to capital l Revise legislation on natural resource taxes, land leasing and state property, etc. l Ensure all revenues from timber royalties are received on time and in full l Strengthen land tax collection activities l 10 28 November 2006 Fiscal Perfomance & Outlook

Revenue Implementation Measures (4) State-Owned Enterprises Study with the purpose of improving the performance of state-owned enterprises l Intensify the management, monitoring, and control of state-owned enterprises l 11 28 November 2006 Fiscal Perfomance & Outlook

Expenditure Implementation Measures Expenditures must adhere to budget-lines; and off-budget expenditures not permitted l Budget planning by Ministries, Departments, Municipalities and Provinces must comply with expenditure priorities l Budget Department responsible for budgeting and National Treasury for all budget execution activities l 12 28 November 2006 Fiscal Perfomance & Outlook

Other Initiatives 13 1. Public Expenditure Review (PER) l Examines expenditure trends from 2002 to 2005 l Reviews macro fiscal performance l Assesses sustainability of the macro fiscal framework and budget financing by source l Reviews institutional framework of PEM l Conducts intra-sectoral analysis of public resources for priority sectors 28 November 2006 Fiscal Perfomance & Outlook

PER Recommendations l l 14 Increase domestic revenue mobilization Improve revenue sharing and intragovernmental transfers Ensure the sustainability of the macrobudgetary framework by considering an increase of the wage bill in line with the resource available and Enhance expenditure and services delivery 28 November 2006 Fiscal Perfomance & Outlook

Background of PEMSP l l 15 National Growth and Poverty Eradication Strategy (NGPES) has indicated a need for improvements in capacity to manage public expenditures The Government’s “Policy Paper on Governance” (March 2003), identifies Sound Financial Management as one of four priority areas. 28 November 2006 Fiscal Perfomance & Outlook

Why the PEMSP? Ø Ø Ø 16 Framework for implementing government policies/strategies laid out in NGPES. To have a prioritized and sequenced program of government initiatives in strengthening of public expenditure management. Framework for mobilizing and coordinating external assistance in support of Govt-led PEM strengthening initiatives to ensure consistency in technical approach and appropriate sequencing and avoid duplication of efforts. 28 November 2006 Fiscal Perfomance & Outlook

Strategic Objective to FY 2009 l improve policy consistency, efficiency, transparency and accountability in public expenditure management l 17 strengthening institutional systems and capacity and making progress towards appropriate international financial management standards 28 November 2006 Fiscal Perfomance & Outlook

PEMSP Achievements l l l PEMSP officially launched November 2005 Steering and Implementing committee are in place Re-establish Secretariat : – l Program document in the process of revision – – l Include new budget law implementation activities And the revenue department Strengthen management of Program – 18 Recruitment IA in the process TOR of SC, IC and Task force are drafted and discussed 28 November 2006 Fiscal Perfomance & Outlook

Budget Planning: progress – New budget law adopted by NA Dec 2006 l l Centralization on tax, custom and treasury administration Prime decree and ministerial instruction issued New framework for inter-government fiscal relation – Revenue assignment and sharing system – Budget norm and grant system – Medium Term Expenditure Framework (ADB TA) l l l – Budget nomenclature being revised l 19 Develop MTEF for Education Sector Develop MTFF and Capacity building (Training and equipment) Revised and start to pilot in the education sector 28 November 2006 Fiscal Perfomance & Outlook

Budget execution: Progress – Decree on National Treasury l l l – Chart of Account l – proposal for upgrading of debt management system approved and work on the To. R Inspection and Audit l l 20 Accounting classification (COA) approved and start to pilot Debt management l – Drafted and discussed on the decree New treasury mandate approved Treasury centralization plan drafted and discussed TOR for Inspection Department institutional strengthening drafted and approved. EU support secured The Peer review for SAO started 28 November 2006 Fiscal Perfomance & Outlook

Capacity Building: Progress – – – – 21 PFM English training Proposal for up-grading of training schools drafted and funding partly secured (Jica/Vietnam/WB/FMCBC) General training program drafted Template for HRM system user requirements drafted Formats for job descriptions, job profiling and work flow analysis drafted Outline of capacity building strategy drafted Proposal for private public partnership seminar drafted 28 November 2006 Fiscal Perfomance & Outlook

Cont. l ICT l l 22 TOR for ICT upgrading of MOF approved and funding secured Outline for MOF ICT strategy drafted Templates for user requirements specifications drafted Proposal for ICT seminar (senior management) drafted 28 November 2006 Fiscal Perfomance & Outlook

Tentative schedule for PEMSP l l l 23 Revised long-term strategy, incorporate the budget implementation and revenue functions Establish Multi-donor trust fund Draft harmonized project and reporting document Continuity with ongoing activities Start on basic activities and the core functions, particularly focus on budget implementation Get detailed work plan approved in Consultative Group 28 November 2006 Fiscal Perfomance & Outlook

PEMSP Work Plan for 2007/08 l Fiscal Planning & Budget Preparation – – 24 Continue develop the MTFF and MTEF, estimate baseline and pilot for key sector Develop budgetary norm, grant system and revenue sharing framework Pilot revised budget nomenclature Strengthen the budget report and publication 28 November 2006 Fiscal Perfomance & Outlook

Cont. l Budget execution, accounting & Reporting – – – 25 Finalize legislative framework (Treasury decree/regulations & manuals) Implement treasury centralization for the pilot provinces Develop detail plan for moving toward treasury single account Pilot the revision chart of accounts Strengthening the IT system 28 November 2006 Fiscal Perfomance & Outlook

l State Audit Organization l l l 26 Start peer review and develop capacity building plan Second PER Develop measurement framework for evaluation the progress of the PFM reform 28 November 2006 Fiscal Perfomance & Outlook

LAO PEOPLE’S DEMOCRATIC REPUBLIC Peace Independence Democracy Unity Prosperity Thank You 27 28 November 2006 Fiscal Perfomance & Outlook