Country Report Laos June 2011

Outlook for 2011-12: Fiscal policy

The government will continue to run budget deficits in the forecast period. The fiscal deficit (including grants) will narrow only marginally in 2011-12, to an annual average of 2.9%, despite a number of revenue-raising measures. A new tax on luxury goods is to be imposed, and there are proposals to introduce taxes on land and inheritance. State-owned buildings could also be sold or leased as required. High global mineral prices will boost revenue, although prices for copper (Laos's most important mineral export) have moderated in the past quarter, falling from a peak of around US$10,000/tonne on the London Metal Exchange in mid-February to US$8,900/tonne in mid-May. Nevertheless, these levels remain high compared with long-term averages. The government will continue to receive royalties from the export to Thailand of electricity from the Nam Theun 2 hydropower facility, which began commercial operations in March 2010.

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