Country Listing

Laos Table of Contents


Government Expenditure

Capital expenditures rose slowly throughout the 1980s, from about 55 percent of total expenditures in 1983 to about 66 percent in 1988; however, by 1989 they had begun to decrease as a result of limited absorptive capacity, a critical factor in the economic picture because it seriously affects economic development. Wages and salaries accounted for the largest portion of expenditures, increasing from 11 percent of expenditures in 1983 to 42 percent in 1988. A substantial amount of this portion in the late 1980s was spent on salary increases and arrears payments: many civil servants had not been paid for up to two years. Subsidies to state-owned enterprises make up most of the remainder of expenditures, but by the end of the decade these subsidies were cut back in response to the reforms of 1988 and 1990. Expenditures for operation and maintenance of basic infrastructure remained inadequate throughout the 1980s. Defense expenditure is an important part of the government budget; however, no figures are available (see The Defense Budget , ch. 5).

Government expenditure as a percentage of GDP increased from 10.7 percent in 1986 to 14.2 percent in 1990; capital expenditure increased from 7.7 percent to 12.1 percent in the same period. However, although the growth rate of total government expenditure increased from 8.3 percent in 1987 to 65 percent in 1990 as wage and salary payments increased, growth in capital expenditure slowed dramatically, from 14.9 percent to slightly negative growth in the same period, because of limited absorptive capacity and decreased aid from nonconvertible currency area countries.

Data as of July 1994