[{"bbox": [97, 153, 1135, 260], "category": "Text", "text": "are inclusive and sustainable and can continue to be used during other emergencies forcing closure of schools, such as natural and/or manmade disruptions. Finally, the current situation provides an opportunity for the MoES to put in place a sustainable and high-quality distance education system, including a satellite education television that can be used both by students and for professional development of teachers."}, {"bbox": [97, 284, 1135, 366], "category": "Text", "text": "In conclusion, the policy is sufficiently relevant and credible for budget support contract objectives to be largely achieved. Therefore the policy can be supported by the Commission with the proposed budget support contract."}, {"bbox": [85, 419, 376, 446], "category": "Section-header", "text": "### 2.3.3 Macroeconomic Policy"}, {"bbox": [97, 461, 1135, 675], "category": "Text", "text": "Despite an estimated growth rebound following the 2020 COVID pandemic, the macroeconomic and the fiscal situation remain precarious. Real GDP growth is projected to rebound to 2.1% in 2021 from 0.5% in 2020, with the agriculture and industry sectors expected to drive growth. The country is facing a significant fiscal challenge to sustain the economy and social spending, as well as to put in place socio-economic measures to counter the impact of the pandemic, at a time of reduced revenue and rapidly increasing debt servicing. The public and publicly guaranteed (PPG) external debt service level is on the rise reflecting tighter external liquidity constraints. The Lao kip depreciated against the US dollar by 12.6% year-on-year (yoy) in early July, and a weakened kip has fuelled domestic inflation as a large portion of consumer goods are imported."}, {"bbox": [97, 700, 1135, 1126], "category": "Text", "text": "While the COVID-19 crisis has exacerbated these challenges, the Lao Government has taken several corrective/mitigating measures to restore macroeconomic stability. The Government has continued to limit budget spending growth by controlling discretionary expenses and postponing new investment projects. The fiscal deficit is therefore expected to decline to 4.7% of GDP in 2021, from 5.2% in 2020. The first draft of the public debt strategy (2021-2025) has been completed. The existing Debt Management Finance Analysis System (DMFAS) is being upgraded to better monitor debt management. In the meantime, GoL's priority is to address the debt repayment deadlines before the end of the year through a renegotiation of its bilateral debts. In parallel, additional response measures to mitigate negative impacts of the second wave of COVID-19 pandemic were announced in May 2021. These include personal income tax exemption, profit tax exemption for microenterprises, duty fee exemption, deferral of road tax payments, lowering utility fees, unemployment benefits and cash transfers. Furthermore, the National Agenda aimed at addressing economic and financial difficulties was adopted in August 2021. It outlines 5 core actions/measures to be implemented by the end of 2023, including (i) promoting domestic production and boosting exports, (ii) strengthening revenue collection, preventing revenue leakage and improving legislation, (iii) promoting frugality, preventing extravagance, enhancing effectiveness of public investment and addressing public debt, (iv) stabilizing the Lao kip, building up foreign reserves and controlling inflation, and (v) enhancing efficiency of the tax legislations and providing guidelines for their implementation."}, {"bbox": [97, 1151, 1135, 1387], "category": "Text", "text": "In the medium-term, the Lao economy is expected to gradually recover, but growth will remain below pre-pandemic levels at 4.5% in 2022 (IMF projections). Therefore, containment of the fiscal deficit coupled with improved debt management is the Government's priority for re-establishing macroeconomic stability, and for lowering pressure on foreign currency reserves, as reflected in the Mid-Term Fiscal forecasts 2021-25. Moreover, the Lao PDR is being increasingly exposed to the impact of climate change and climate variability which, amongst others, puts agriculture productivity and food security at severe risk. All these challenges have shown that, in order to support sustainable growth in Lao PDR, there is a need to invest in resilient infrastructure and effectively manage the environmental and social impacts of these investments, as well as to strengthen disaster preparedness and risk reduction."}, {"bbox": [97, 1414, 1135, 1549], "category": "Text", "text": "The IMF has no programme in Lao PDR since 2012, but it conducts Article IV consultations on a two-year cycle. The last article IV mission took place in December 2021. Preliminary projections based on the data provided foresee 2% GDP growth for 2021 with an inflation rate reaching 5%. The debt situation is not expected to improve. Policy measures adopted by the Government are deemed coherent, yet they need to be fully implemented. Taking into account the current situation, especially the high level of debt, a negative outlook is anticipated."}, {"bbox": [97, 1574, 1135, 1626], "category": "Text", "text": "Currently, the overall macroeconomic situation is subject to a further review following the recent IMF mission for Art. IV in Lao PDR"}, {"bbox": [1027, 1680, 1144, 1706], "category": "Page-footer", "text": "Page 10 of 35"}]