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Sluggish Disbursement: Barrier to Economic Growth

Posted: Wednesday, August 02, 2017

According to the General Statistics Office (GSO), the State budget disbursement in the first six months of 2017 reached 38.7 per cent of the full-year target and rose 7.6 per cent over the same period of 2016. However, the disbursement pace of government bonds and State fund remained slow.


The disbursement of government bonds and State funds reached only VND7.4 trillion and VND24.2 trillion, down 53.2 per cent and 8.7 per cent from the same period of last year, respectively. The aggregate disbursement value of all sources approximated that in previous years but was still lower than this year’s plan.


At the meeting of the Prime Minister’s Working Group on public investment disbursement in 2017, Mr Mai Tien Dung, Minister and Chairman of the Government Office and Head of the Working Group, said, 13 ministries, agencies and localities disbursed less than 20 per cent of the plan in the period and they were criticised by the Prime Minister.


The 13 criticised agencies included the Ministry of Planning and Investment, the Ministry of Foreign Affairs, the Ministry of Health, the State Bank of Vietnam, the Commission for Ethnic Minority Affairs, Vietnam News Agency, Vietnam War Veterans' Association, Hanoi City, Da Nang City, Ho Chi Minh City, Binh Duong province, Tay Ninh province and Binh Phuoc province.


According to the Working Group, the lateness in public investment disbursement is seen as a bottleneck to economic growth. If there is no urgent solution to accelerate the disbursement progress, it will negatively affect growth while the rate and obligation of public debt repayment are increasing.


In addition to hindering the growth target, slow disbursement will cause the government to bear interests payable to the people. Public debt will rise to 65 per cent of the gross domestic product (GDP) as of the end of 2017, hitting the ceiling set by the National Assembly.


According to the report by the Working Group, given that the public debt hits the upper limit, the government will have to take domestic borrowing into account. To borrow money and offset overspending, macro management tools such as interest rates and exchange rates will be employed. This will put pressure on inflation and the economy as a whole.


“Paying interest for money in the safe is a kind of wastefulness,” said Mr Dung.


He explained that slow disbursement is firstly caused by cumbersome procedures, lack of determination and direction and weak contractors.


Regarding the disbursement rate of public investment by the State Bank of Vietnam, the Ministry of Finance provided some specific information. According to the ministry, in 2017, at the Prime Minister’s Decision 2562/QD-TTg dated December 31, 2016 on allocation of State budget investment plan for 2017, the total State fund assigned to the State Bank of Vietnam by the Prime Minister is VND73,380 million, including VND7,645 million of well-allocated fund and VND65,735 million of improperly allocated fund.


The report from the State Treasury of Vietnam showed that the State Bank disbursed VND4,292 million in the year to June 30, 2017. Therefore, the State fund disbursement rate in 2017 by the State Bank was 5.8 per cent as of to June 30, 2017 (compared to the total State budget of VND73,380 million in 2017 assigned by the National Assembly and the Prime Minister).


As for the improperly disbursed fund of VND65,735 million in the Prime Minister’s Decision 2562/QD-TTg dated December 31, 2016, the SBV will coordinate with the Ministry of Planning and Investment to grant the power to fund Project NH09B, which fulfilled less than 30 per cent of the disbursement plan, thus failing to receive the new budget in 2017.


Quynh Anh


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