Press Release: IMF Executive Board Reviews Noncomplying Disbursement to the Lao People's Democratic Republic
July 9, 2003
The Executive Board of the International Monetary Fund (IMF) has reviewed matters related to the noncomplying disbursement to the Lao People's Democratic Republic (P.D.R.) in an amount equivalent to SDR 4.5 million (about US$6.3 million) that was made on September 9, 2002 following the completion by the Executive Board of the second review under the Lao P.D.R.'s Poverty Reduction and Growth Facility (PRGF) arrangement in August 2002. (See News Brief No. 02/90) It was agreed that the Lao P.D.R.'s nonobservance of the end-March 2002 performance criterion on the contracting or guaranteeing of nonconcessional public sector external debt with a maturity of more than one year would be waived in view of the corrective actions being taken by the authorities.
The issue of misreporting arose because of inaccurate information on the contracting and guaranteeing of nonconcessional public sector external debt for March 2002. In particular, the authorities did not inform the staff about the guarantee for a loan of about US$50 million because the Lao officials misunderstood the loan terms as being concessional and because of the inadequate reporting system by state-owned enterprises of external debt transactions to the Ministry of Finance (MOF). In November 2002, the Lao P.D.R. authorities renegotiated the loan to fully concessional terms, and are taking corrective measures to enhance the monitoring and reporting of public sector external debt.
Following the Executive Board's discussion on Lao P.D.R., Deputy Managing Director and Acting Chairman, Shigemitsu Sugisaki stated:
"Executive Directors expressed their concern about the Lao authorities' failure to disclose information related to the performance criterion for contracting and guaranteeing nonconcessional external debt for March 2002. They took note of the authorities' explanation that the failure was related to administrative capacity constraints, as well as a misunderstanding of some PRGF data requirements. They noted further that the performance deviation was temporary, most of the agreed corrective measures on external debt reporting had been implemented, and the authorities were committed to implementing the remaining measures promptly. In light of this, Directors agreed to waive the non-observance of the performance criterion. At the same time, they underscored the need to ensure fully accurate reporting of external debt in the future."