Growing Pressures on Budget 2016

This information has been highlighted by Chairman of the National Assembly’s Finance and Budget Committee Phung Quoc Hien on the report on the implementation of the State Budget to the National Assembly by October 20.

 

The National Assembly’s Finance and Budget Committee approved the estimates of revenues and expenditures, proposed to the government and gave some notes. Regarding revenue, the government has the state budget revenues in 2016 projected to be VND1,014,500 billion, up 9.4 percent over the 2015. In regardless of VND30 trillion collected from the sales of the state-owned capital of a number of enterprises, the total budget revenues will increase by 6.1 percent. This growth rate is low but reasonable in this current situation when the oil revenue has decreased due to a drop of oil price and other revenues are decreasing because Vietnam is committed to international agreements regarding tax reduction. According to the Committee, this growth is reasonable to ensure the autonomy and safety of the budget.

 

It is expected that by 2016, the budget deficit will have increased by 4.95 percent of GDP or VND254 trillion, an increase of VND28 trillion compared with 2015 and the public debt will have increased by 63.2 percent of GDP by December 31, 2016.

 

Regarding the budget expenditure, for the recurrent expenditure of 2011-2015, the National Assembly’s Finance and Budget Committee supports some measures to reduce recurrent expenditure as proposed by the Government, but proposed a review and evaluation of the effectiveness of various programs and projects to save more thoroughly than in 2015 and drastically cut unnecessary expenses, especially used for festivities, conferences, festivals, and overseas business trips.

 

For other expenditures for development, the year 2016 will be the first year the public spending limits set for medium-term investment in the period of 2016-2020 in accordance with the State Budget Law and the Investment Law.

 

The majority of delegates of the National Assembly’s Finance and Budget Committee said that due to limited state budget funding for investment to meet urgent tasks, the Government is required to mobilize external resources like issuing VND60 trillion in bonds, collecting lottery and land use fees, raising funds from ODA, preferential loans abroad, and capital from equitisation of SOEs for investment and development and the allocation of the budget now is reasonable to improve resources for development and guarantee the economic growth of 6.7 percent, higher than in 2015.

 

Regarding the state budget, the year 2016 is still facing higher pressure on budgeting. The revenue growth at 9.4 percent is in contrast with the spending growth rate of 11 percent; 31.2 percent spending for recurrent expenditure, up 5.8 percent, leads to a burden on the state budget; debts of the state budget including debts for basic construction, debts of policy banks, and debts of issued policies.

 

The budget deficit of 2016 is estimated at 4.95 percent of GDP or VND254 trillion, an increase of VND28 trillion compared with 2015 and the public debt is up to 63.2 percent of GDP, estimated by December 31, 2016. According to the National Assembly Finance and Budget Committee, due to current situation that the economy has not recovered strongly and FDI still plays an important role, the deep cuts in public spending will lead to a reduction in investment resources.

 

Therefore, the Committee agreed to keep budget deficit under the old calculation, at a high level of 4.95 percent of GDP. However, the public debt has reached the limit of 65 percent of GDP, the pressures on increasing debt payment, budget balancing for debt payment, decreasing issuance on government bonds, maturing debt and interest rates, increasing issuance fees, leading an increase of public debts, require the Government to provide positive and insistent solutions.

 

According to the National Assembly Finance and Budget Committee, in the long term, it is necessary to restructure revenues to ensure a mobilized state budget of above 20 percent of GDP, to use the budget economically and to have all payments estimated as well as be consistent with the schedule of reducing budget deficit and public debt in the period of 2016-2020 under the State Budget Law 2015 to ensure national financial security.