Close control of debt augurs well for budget

All resources have been mobilised to help struggling businesses, photo Le Toan

The government last week reported to the National Assembly (NA) that the total state budget revenue this year is estimated to be over $59.3 billion, up 1.7 per cent against the initial estimates and equal to 90.6 per cent of the implemented figure for 2020.

Meanwhile, the total state budget spending will likely be $74.3 billion, tantamount to 101.3 per cent of the initial estimates. The total state budget overspending for 2021 is estimated to be about 4 per cent of GDP, with public debt at the end of 2021 sitting at about 45 per cent of GDP. All these rates remain within a safety level as stipulated by the NA.

“We have focused on radically saving money and reducing recurrent spending and unnecessary expenditure, while mobilising all resources to use money for fighting the pandemic at about $2.35 billion,” stated the government report. “This includes $760.87 million as provision for the central budget in 2021; $635.65 million as a reduction and cut from the central budget expenditure in 2021; $579.56 million as the central budget transferred from 2020 to 2021; and $376.5 million from the COVID-19 vaccine fund as of September 10.”

The total value of all fiscal solutions that have and will be enacted by the NA Standing Committee and the government this year will be about $6.08 billion.

According to another government report, in the 2016-2020 period, the economy’s debt safety norms were closely controlled and stayed within the permissible limits approved by the NA. “The public debt has been reduced gradually on an annual basis, contributing to increasing the room for applying the fiscal policy,” the report added.

Specifically, the debt-to-GDP ratio decreased from 63.7 per cent in late 2016 to 55.2 per cent at the end of last year, while the government debt in GDP went down from 52.7 per cent in 2016 to 49.1 per cent by late 2020. The foreign debt in GDP shrank from 49 per cent in 2017 to 47.2 per cent by late last year.

By 2025, the public debt is forecast to not exceed 60 per cent of GDP, while the government debt will not surpass 50 per cent of GDP. The safety limit will be 55 per cent of GDP for the public debt and 45 per cent of GDP for the government debt.

The Ministry of Finance reported that the public debt expanded by 18.1 per cent in the 2011-2015 period, tripling the economic growth rate. However, it dropped to 6.8 per cent in the 2016-2019 period, equivalent to the economic growth rate.

In 2020 alone, it accounted for 55.2 per cent of GDP – this rate, however, would have been reduced if there had been no major rise in the state budget spending for supporting businesses out of difficulties while battling the ongoing pandemic.

Last year, the Vietnamese economy suffered from a total state budget deficit of $11.87 billion with the total budget expenditure reaching more than $77.39 billion, including recurrent spending of $42 billion or 54.2 per cent. Policies on deferred tax payments and directly supporting businesses and the public have also amounted to tens of billions of US dollars.

For 2021, the government is set to borrow over $27.14 billion, which is made up of $22.93 billion from domestic sources and $4.21 billion from foreign lenders. Of this, about $25.2 billion will be used to balance the central budget while the remainder will be spent on lending. The government is expected to repay debts of around $17.15 billion in 2021.

Under Vietnam’s recently-approved public debt management programme, the total borrowing until 2023 will be $75.65 billion, of which $69.56 billion will go to the central budget.

The local budget spending deficit is limited to 0.2 per cent of GDP as stipulated in law, and the repayment obligation of local authorities is approximately $800 million.

According to The Economist’s Global Debt Clock, by late last week Vietnam’s public debt in GDP stood at 45.6 per cent, and per capita public debt was $1,450, while the total public debt was almost $94.9 billion.