Facing budget challenges 2016 to 2020

Development investment expenditures are rearranged, avoiding spread to promote economic infrastructure to develop faster, stronger, with better service

Domestic revenues rising

According to MOF statistics, State budget revenue for the period 2011-2015 is almost 2 times that for the period 2006-2010 and more than 5 times that in 2001-2005. Evaluating this issue, Finance Minister DinhTien Dung said: While oil prices continues to fall, and tariff is reduced under international integration, the fact that the size of State budget revenues is still doublecompared with the previous period is a very significant achievement.

Besides, the structure of revenues has a positive change, the proportion of domestic revenues per period increased from 58.9% (2006-2010) to 68% (2011-2015). Particularly in 2015 represented 74% of total state budget revenues, higher than the planned 70%, and up to July – 2016 accounted for 79.3%. The rate of mobilization from tax and fees, to the State budget is about 21% of GDP, close to the proposed plan, which is approximately to the level of the mobilization period 2001-2005 (about 22% of GDP), lower than 2006- 2010 (24.8% of GDP).

State budget expenditure was close to the original 5-year oriented plan, focusing more on implementing wages policy and social security. However, the proportion of the budget mobilization from the economy tended to decrease, with pressure on state budget expenditure, especially expenditure on ensuring social welfare. Particularly, in social security expenditure (wages not included) increased an average of 18% per year, higher than the State budget expenditure collection rate.

Expenditure on debt payment is increasing, reducing the rate of expenditure on development and investment in total State budget expenditure; and the budget deficit is higher than planned. By the end of 2015, public debt was 62.2% of GDP; Government debt was 50.3% of GDP; the nation's foreign debt was 43.1% of GDP; direct debt obligations of the government was at 16.1% of the total State budget revenue, within the allowable range; the debt is paid in full and on time; gradually restructure the debt portfolio, extend the loan term to steadily reduce the repayment pressure, debt rollover and refinancing risks.

These are remarkable numbers after 2015 ended a turbulent period for Vietnam's economy.

Short-term pressure is still great

For the period 2016-2020, the MOF identified goals are to mobilize, distribute, manage and use financial resources efficiently with all national economy and society development requirements and orientation; gradually restructure the State budget, continue to invest in human resources and deal with social issues, ensuring national Defense and security; boost administrative reform and strengthen financial management and supervision, to ensure the safety of public debt.

Among them, mobilization rate to the state budget to reach21%-22% of GDP, including tax and charge around 19%-20% of GDP; gradually raise the proportion of domestic revenues to 2020, reaching 80% of total State budget revenues. By 2020, the proportion of investment and development expenditure to for 19-20% of the total State budget expenditure, regular expenditure proportion to drop to about 58%. The average budget deficit to be 4% of GDP; maintainoutstanding debt levels and national government within the limits prescribed, public debt does not exceed 65% of GDP, government loan does not exceed 55% of GDP, foreign debt of the country does not exceed 50% of GDP.

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Outlook from the expert perspective, Mr. Nguyen Duc Do – Deputy Director of Institute for Financial Economics, Institute of Finance, said: there are challenges for the budget in 2016-2020. The most visible difficulty lies in reducing State budget revenues due to reduced import duty under the integration commitments and crude oil prices continuing to remain "low" and the ongoinginternational turmoil. Domestic revenues are impacted by low inflation, low growth leading to revenue growth is difficult to achieve the target. For example, if growth remains at 6%, inflation at 1%, so the possibility is to increase collecting to 7% per year. However, along with these companies that are thriving, the rest are mostly facing difficulties, this could drag the 7% above down.

With difficulty from the State budget revenue, expenditure pressure is growing again. Organization structure is still cumbersome. The policy that get 1 new when two retire would work, but the result could only be seen after a 5-10 years. In the next few years, debt payments will also be a great burden for the State budget, especially when interest rates are relatively high compared with the rate of growth and inflation. In the past time, although government funds are mobilized with longer term but with the amount of the original debt are expenditure pressures in the short term.

Synchronized policy

Faced with the challenge of the next 5 year's budget, Minister DinhTien Dung has affirmed that: "We need to synchronize policies to ensure better integration requirements, also ensure to promote national economic development, ensure stable revenue sources for the State budget. This is a very serious issue that we need to continue to address. "

To achieve this, the MOF will deploy multiple synchronized solutions efficiently. In particular, with policy for collecting, keep reviewing to make adjustments and amendments and supplements to ensure appropriate revenues, debt payers and consistent with international integration commitments, reduce risks due to the impact of the external environment, facilitate for the development of production and business, promote restructuring SOEs. To expenditure policies, together with the priority in investment and development expenditure from the State budget at an appropriate level, we should strongly promote investment forms outside the State budget, radically saving regular expenditure, strongly implement personnel downsizing; strictly manage borrowing and payment of loans, ensure national financial security.

Referring to the reduction in regular expenditure, Mr. Nguyen Minh Tan - Deputy Director of the State Budget, Ministry of Finance pointed out three fundamental solutions. Firstly, efforts to increase State budget revenue to achieve a significant increase compared to the previous period for additional resources to ensure expenditure according to the requirements set out for economic development. When revenue structures increase, resources will increase, facilitate and ensure the regular expenditure and make more resources for development investment. Along with that, to adopt measures to mobilize long-term capital with building, effectively implementing the medium-term spending plans to anticipate existing resources and plan the proportion of regular expenditure, expenditure on development, investment and debt paying in the expenditure structure of the State budget.

In particular, internal regular expenditure needs to be more frugal. Authorities and units should be thrift on regular expenditure, especially to recheck and eliminate expenses that are not really needed, only keep the essential expenses for people. Finally, after having cut regular expenditure, it's worth a check to reorder the investment and development expenditure with focusing on really important and urgenct projects, with high economic efficiency, avoid spreading to promote the development of economic infrastructure faster, stronger, with better service.

Besides balancing the state budget, the MOF has been and will continue to implement the restructuring the loans of the State budget by increasing the proportion of medium and long-term loans with reasonable interest rates, effectively implement risks handling and management to the public debt portfolio; issue Government bonds to the international capital market to restructure the domestic debt of the government; enhance the efficiency of government loans; strictly control government-guaranteed loans, debts of local governments, debts from basic constructions; ensure national public debts, government debts, external debts within the limits prescribed.