Pressure on the Finance Minister
As the holder of the keys of the national treasury, Finance Minister Dinh Tien Dung is facing great pressure.
While the Covid-19 pandemic has caused the country’s economic growth to drop to a "record-low" rate, resulting in a decline of budget revenues, the need for relief expenditures for flood-affected localities and businesses has increased more than ever.
Finance Minister Dinh Tien Dung
Minister Dung said at the ongoing National Assembly session: "Budget revenue in the past 10 months only reached 75.2% of the estimate, down 10.3% compared to the same period of 2019, the lowest level in the past 10 years."
The unsatisfactory numbers
Meanwhile, reports from provinces and cities, which are the major contributors to the state budget, revealed an unsatisfactory picture. In the past 10 months, Hanoi’s budget revenue only reached just over 70% of the plan. The figures are nearly 65% for Ho Chi Minh City, nearly 61% for Vinh Phuc, and just over 56% for Da Nang. These are "very low" levels for many years, causing pressure on the central budget.
In addition, in order to realize the dual goal of focusing on epidemic prevention and fighting, economic development and ensuring social security as required by the Government, the Ministry of Finance had to issue many policies to reduce about VND100,000 billion of corporate tax for enterprises.
While budget revenue declined, a number of expenditures rose, to ensure a balance between revenue and spending, the Government proposed that the National Assembly allow an increase in overspending in 2020 by about VND95 - VND133.5 trillion, equivalent to the rate of overspending of about 4.99% - 5.59%. Thus, the estimated public debt is about 56.8% - 57.4% of GDP.
However, National Assembly deputy Nguyen Minh Son from the southern province of Tien Giang calculated that the public debt in 2020 is expected to exceed VND3,600 trillion, the principal and interest money of about VND360 trillion. In 2021, public debt will exceed VND4,000 trillion and the Government’s direct debt payment obligation will be about VND368 trillion.
National Assembly deputy Nguyen Minh Son said in 2021, public debt will exceed VND4,000 trillion and the Government’s direct debt payment obligation will be about VND368 trillion.
Deputy Son said: “With such an increase, the liquidity risk and interest rate risk are both higher: On the one hand, it significantly reduces the room for development investment and recurrent spending of the budget. On the other hand, there is a potential risk to national financial security, which can negatively affect the national credit rating. In the context of the room to increase budget revenue in the next period face difficulties, it is necessary to have a particularly drastic, effective and economical solution in using the capital."
National Assembly deputy Truong Trong Nghia of Ho Chi Minh City said: "Some voters worried: Is it true that we adjust the economic scale to raise criteria such as budget deficit, public debt and foreign debt. This creates room for debt financing and budget spending, but it can also be room for waste, inefficiency or corruption in public investment."
Drastically restructuring the budget and public debt
Facing these concerns, Minister Dinh Tien Dung said: “We agree with deputies Nguyen Minh Son and Truong Trong Nghia that although the ratio of public debt to GDP has decreased in recent years, the scale of absolute debt has still increased, both the principal and interest obligation over the total state budget revenue this year and the next few years will increase, and the annual mobilization is large, creating risks in financial security."
"This, on the one hand, requires us to continue to drastically restructure the state budget and public debt in a more sustainable direction, and on the other hand to further improve the efficiency of the capital we borrow for development investment."
Budget revenue in the past 10 months only reached 75.2% of the estimate, down 10.3% compared to the same period of 2019, the lowest level in the past 10 years. Photo: Le Anh Dung
In fact, the public debt growth rate for the 2011-2015 period was over 18%, about 3 times the economic growth rate, and in the 2016-2019 period, it decreased to only 6.8%/year, equivalent to economic growth (in 2020, it is estimated to increase by 10% compared to 2019). Structure of domestic/foreign loans has been adjusted towards more sustainability; Issuance and maturity of government bond portfolio increased while loan interest rate dropped deeply, contributing to ensuring national financial security.
Mr. Dung also said: “The budget is seriously affected by the Covid-19 pandemic, natural disasters and epidemics, but thanks to the fiscal sources we have accumulated over the four years 2016 - 2019, safe management of public debt... we can still ensure the spending requirements for important tasks, including urgent tasks arising from natural disasters, epidemics, national defense and security and ensure sources for investment and development according to calculations for 2020 to stimulate domestic demand, create a driving force for economic growth in the medium and long term. This can be considered the bright point of the state budget-finance in the 2016-2020 period."
So far, the Government has basically achieved the financial and budget targets in the spirit of Resolution 07 of the Politburo and Resolution 25 of the National Assembly, specifically:
- Rate of mobilization into the state budget reached 24.5% (the plan was 23.5%); the revenue-expenditure structure changed positively; the proportion of domestic revenue in total state budget revenue increased from 68% in the 2011-2015 to 80.9% in 2016-2019 and is estimated to reach 84.3% in 2020 (the target is 84-85%).
- To arrange the proportion of estimated expenditure for development investment to gradually increase to 26.9% in 2020; actual implementation is estimated at 27-28% (target is 25-26%). Proportion of recurrent expenditure decreases to 60.5% in the 2020 estimate (the target was lower than 64%) while ensuring the source for adjustment of base salary, important tasks, national defense and security, social security and prevention of natural disasters and epidemics.
- The rate of state budget deficit is about 3.8% of GDP (the target for the whole period is lower than 3.9% of GDP); public debt decreased from 63.7% of GDP in 2016 to 55% in 2019 and 56.8% in 2020.
Commenting on the draft documents submitted to the upcoming 13th National Party Congress, VietNamNet introduces the opinions of Dr. Nguyen Dinh Cung, former Director of the Central Institute for Economic Management.
The disbursement of public investment from the state budget has reached 60 percent, the highest ever level. The disbursement of ODA has also improved, but is still low.