VND1 quadrillion package for economy via interest-rate subsidy proposed
The Ministry of Finance has advised the Government to launch a demand stimulus package through an interest-rate subsidy, worth VND20 trillion a year and VND40 trillion for two years.
Minister of Finance Ho Duc Phoc
Minister of Finance Ho Duc Phoc said on November 9 that the 2021 state budget collection and expenditure tasks have been fulfilled with collections exceeding the estimates, the expenditures close to estimates, and the state budget overexpenditures within the safety line.
The Government has issued fiscal policies to support businesses and people hit by the pandemic, as well as pandemic prevention policies, worth VND200 trillion in total. The fiscal policy has been regulated in a flexible way.
According to Phoc, no space is left for public debts, because in 2016-2020, the total Government’s debts reached VND1,852,000 billion, while it plans to borrow VND3,068,000 billion in 2021-2025, or 1.7 times higher than the previous period.
The Ministry of Finance (MOF) supports a demand stimulus package to stimulate economic development.
“We are advising the Government to launch a demand stimulus package through an interest-rate subsidy, worth VND20 trillion a year and VND40 trillion for two years,” Phoc said.
“So, with the 4 percent support, we will have VND1 quadrillion to be pumped into the economy, which would help create jobs, increase output and reduce budget overexpenditures in subsequent periods,” he said.
Learning experiences from the VND1 billion interest-rate subsidy package in 2009, which led to bad debts , the Ministry recommended that instead of broad support, the package would be allocated to certain subjects, including ones with potential that can create value to the economy, and businesses that don’t have bad debts and can satisfy requirements for loans. The procedures will be simple, accurate and strict.
Regarding questions from National Assembly Deputies related to the small increase in estimated budget collections and mobilization ratio plan in 2022, Phoc said the state budget collection is not proportional to the GDP growth rate.
In 2011-2012, for example, when the GDP growth rate was 5.25 percent, the budget collection increase was just 2.2 percent. Meanwhile, the GDP growth rate in 2020 was 2.91 percent, but revenue from domestic sources increased by 1.6 percent, while revenue from businesses decreased by 2 percent.
Weaknesses that need fixing
Minister of Planning and Investment Nguyen Chi Dung said that pandemic prevention and control and socio-economic development have helped to identify valuable lessons and the shortcomings that need to be fixed immediately to ensure sustainable development.
The capability of the healthcare system, especially preventive healthcare units, is still weak, leading to embarrassment and unreasonable responses to the rapid and complicated developments of the pandemic.
The second problem is the limited capability of social administration, state management, and situation handling, leading to inconsistency in implementing strategies among localities and the disruption of goods circulation, production and supply chains.
The third lesson is the important strength and role of the political system and people.
Dung said the pandemic has been basically controlled nationwide. But in the immediate time, when Vietnam begins reopening the economy, the number of infections may increase, especially in localities with low vaccination coverage.
In such conditions, agencies and local authorities need to strictly observe Resolution 128, firmly maintaining the stance of adapting safely and flexibly to new circumstances and effectively controlling the pandemic.
Extending the FIT for wind power is unreasonable
Regarding the proposal on extending the FIT, or feed-in tariff, for wind power projects, Minister of Industry and Trade Nguyen Hong Dien said FIT is a price subsidy mechanism of the State which has been applied only for a certain period to encourage investments in certain business fields.
The extension of the preferential pricing is unreasonable because this will cause unfairness, legal consequences and economic losses to the State and electricity users.
The Ministry of Industry and Trade (MOIT) is drafting a Prime Minister decision on the development of wind and solar power projects in accordance with the Investment Law, to be implemented under the PPP mode. Under the new mechanism, bidding and auctioning will be the major solutions for choosing investors and defining electricity prices.
Investors will negotiate with EVN on electricity prices they sell to Electricity of Vietnam (EVN). The prices are within the electricity generation price framework to be set by MOIT.
MOIT is building a price framework for wind and solar power projects for investors to use when negotiating with EVN in the future.
Tran Thuong - Huong Quynh
Vietnam is considering an unprecedented support package, including tax reductions, interest rate subsidies and cash to people. However, the package needs to be tailored to the economy’s size or it will cause “side effects”, an expert has said.
The Ministry of Planning and Investment has proposed a post-pandemic economic recovery and development program costing some VND800 trillion, 3.5 times higher than the Government’s package in 2021.