Budget Deficit in 2020 Below 4% of GDP, Public Debt within Limit

12:59:25 PM | 11/1/2021

The State budget revenue fulfilled 98% of the estimate and rose by VND184 trillion as compared to the adjusted target of the National Assembly of Vietnam in October 2020, said a report released by the Ministry of Finance at the online conference that reviewed State budgetary and financial activities in 2020 and previewed tasks and actions in 2021. The fiscal revenue to GDP was 23.9%.

Many flexible fiscal policy solutions (such as exemption, reduction, extension of taxes, fees and charges and land rents) were launched to remove difficulties for production and business and timely support for businesses adversely impacted by the COVID-19 pandemic. As of December 31, 2020, about VND123.6 trillion in taxes, land rentals, fees and charges were extended, or exempted or reduced.

In 2016-2020, total State budget revenue reached VND6,890 trillion (US$300 billion), exceeding the plan, a very positive level in the difficult conditions to State budget revenue in 2020 when the economic growth was much lower than expected.

The structure of State budget revenue became more sustainable, with the share of domestic budget revenue rising from 68% in the 2011-2015 period to 85.5% in 2020, the share of crude oil-based budget revenue and balanced export and import-based budget revenue sliding from 30% in 2011-2015 to 14.2% in 2020.

The State budget spent over VND18 trillion to overcome COVID-19 pandemic impacts as per the Government's Resolutions 42/NQ-CP and 37/NQ-CP.

The central budget used VND12.4 trillion to support localities to address consequences of historic storms and floods and restore production in the wake of natural disasters and the pandemic; supply nearly 37,000 tons of national reserve rice for hunger relief for the people, and deal with the consequences of natural disasters and restore farming.

The highlight in budget spending in 2020 was the quicker progress of funding disbursement than in previous years. By December 31, 2020, spending on investment and development reached 82.8% of the estimate (compared with 62.9% of the plan) and accounting book closing time in 2020 (January 31, 2021) was estimated to reach 92-93%. However, about VND26 trillion of foreign loans for development investment could not be implemented and was forced to be canceled.

The State budget deficit was estimated at VND248.5 trillion, less than 4% of the gross domestic product (GDP). Generally, in five years from 2016 to 2020, the average state budget deficit was about 3.6% of GDP.

In 2020, the Ministry of Finance actively managed the issuance of Government bonds to offset overspending and repay principal in accordance with the state budget's capacity, mainly mobilizing medium and long-term capital (no bonds of shorter than 5-year term) and no further borrowing from international financial institutions like WB and ADB, helping raise national credit ratings.

Government bond terms in 2020 were over 3.5 times longer than 2011, from 3.9 years to an average of 13.94 years, bringing the average term of government bond portfolios to 8.42 years at the end of 2020, nearly 5 times longer than the end of 2011 (1.84 years). The average deposit interest rate also dropped sharply, from 12.01% in 2011 to about 2.86% in 2020.

By the end of 2020, public debt equaled about 55.8% of the GDP and Government debts reached 49.6% of GDP, within the permitted limit.