VIetNamNet Bridge - The budget deficit is higher than the permitted level, while the public debt nearly has reached an alarming rate. But huge projects capitalized at trillions of dong are still proposed.  

 

The budget deficit is higher than the permitted level

Vietnam has vowed to cut the trade deficit to 4.5 percent of GDP in 2015. However, the trade deficit levels have always been higher than 4.5 percent in recent years: it was 4.4 percent in 2011, but soared to 5.4 percent in 2012 and to 6.6 percent in 2013. It decreased to 5.3 percent in 2014 and 5 percent in 2015, but it is still higher than the targeted level.

The high budget deficit has been blamed on lower budget revenue caused by the tariff cuts and economic difficulties, and on higher capital demand for investment and development. 

However, economists believe the major problem lies in overspending caused by loose budget discipline, especially in localities.

Huynh The Du, director of FETP, when speaking at a conference on public debt management, noted that Vietnam is following the so-called ‘lobster budget mechanism’. He implies that local authorities waste money on huge and unnecessary projects like the poor buy lobster for their meals.

A province decided to build a monument worth VND400 billion, the amount of money which was equal to 5 percent of the provincial spending and more than 10 percent of the provincial budget revenue in 2010.

Du commented that local authorities just try to draw up projects and ask for money from the central budget, while they don’t care about the projects’ efficiency and usefulness. A lot of construction works do not have significance to the national welfare and people’s livelihoods.

Vietnam has vowed to cut the trade deficit to 4.5 percent of GDP in 2015. However, the trade deficit levels have always been higher than 4.5 percent in recent years

Economists have warned about the building of imposing administration centers. Hai Phong City, for example, plans to build an administration center with total investment capital of VND10 trillion. Khanh Hoa province wants a center worth VND3 trillion, Nghe An VND2.1 trillion and Ha Tinh VND2 trillion.

To build such imposing offices, local authorities have asked for ‘financial support’ from the state budget. Hai Phong has asked for VND6.8 trillion. Nghe An, which spent VND16 trillion in 2014, spent VND10 trillion sourced from the state budget.

New projects still have been approved by local authorities, even though other projects still have not been finished because of the lack of capital. 

In Ninh Binh province, for example, 599 projects had been reported as unfinished by the end of 2011 because the projects lacked VND9 trillion. 

However, the local authorities still approved 347 new projects for the next two years 2012 and 2013 with total investment capital of VND6.9 trillion.

The high budget deficit has caused the ratio of public debt on GDP to increase rapidly, now nearly hitting the limit of 65 percent set by the National Assembly.

Tran Thuy