Minister Dinh Tien Dung: The state budget restructuring in the past 3 years gained positive results

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Minister Dinh Tien Dung presented to the National Assembly

Budget sustainability is strengthened

With the achieved results of the state budget restructuring in 3 years of 2016-2018, and the sustainability of the state budget, it can be said that the results achieved in the past 3 years were quite positive; some targets have met ahead of time; the budget sustainability was strengthened, contributing to maintaining macro stability. It was reflected that the state budget revenue in the 3 years exceeded estimates, reaching about 54-55% of the plan; the share of domestic revenue increased, revenues from crude oil and import and export activities decreased. Together with some revenues from mining and sale of other state properties, the share of revenue from land use fee in the domestic revenues tended to reduce, from 11% in 2016, 12% in 2017, to 10.6% in 2018, and is expected to decrease to about 6.7% in 2020. For some localities, these revenues have decreased sharply over time.

The restructuring of the state budget expenditure also gained positive results, soon meeting the National Assembly’s request. The expenditure share for development investment increased from 17% in 2015, and was expected to 27-28% in the 3 years of 2016-2018, higher than the National Assembly’s request. Recurrent expenditures have fallen to 63%, while the adjustment of average salary of 7% per year has been still implemented, along with the implementation of multidimensional poverty policies, social security, national defense, etc.

State budget deficit was strictly controlled both in absolute numbers and in proportion to GDP. It is expected to be 3.67% of GDP in 2018.

Public debt was strictly controlled and repaid fully. As a result, public debt growth has fallen by almost half, contributing to decreasing the public debt rate from 63.7% of GDP in 2016 to 61.4% of GDP in 2018, and to 60.8% for the expectations of 2020.

In summary, the state budget restructuring in the past 3 years were positive, stuck to the National Assembly’s Resolution and the sustainability of state budget was strengthened. In case where there are not great fluctuations, with the State Budget estimates for 2019 being submitted to the National Assembly, the basic objectives of the Five-Year Financial Plan for 2016-2020 will be basically completed.

Estimates are closer to the reality

Regarding the contents of the implementation and allocation of revenues from economic sectors and some key localities, in 2018, the Government is reporting that revenues from SOEs; from the FDI sector and from non-state sector have not reached the budget estimates. The main reason was due to the high estimates for 2018. In addition, the 2017 estimates were also high. Despite failure to reach the estimates, the revenues from the 3 economic sectors in 2018 still grew quite well. Generally, the revenue growth of the 3 sectors increased by 12.8%, which was a positive rate compared to the economic growth rate of 6.7% and the inflation rate of 4%.

For the achievement of the above results, apart from the drastic direction of the Government, they are also due to the contribution from localities, especially 16 localities that made large contributions to the Central budget. These are localities with large economic scale, good industrial and service growth and have large potential for state budget collection. Therefore, when making revenue estimates, the Government assigned these localities with desired targets higher than the average level on the basis of requesting them to closely monitor the actual economic development in the locality and stepping up the management of revenues, anti-revenue losses and the recovery of tax debts.

However, during the implementation, there was a difference between the reality and the forecast, leading to the completion of revenue estimates in some localities meeting difficulties. However, generally, the allocation of revenue estimates has been closer to the reality.

Receiving the opinions of the National Assembly, through the experience of the 3-year estimation 2016-2018, the budget revenue estimates for 2019 allocated to the localities have adjusted in accordance with the reality. Accordingly, the Ministry of Finance and the localities shall unify the data to submit to the Government to report to the National Assembly on the estimated domestic revenues from production and business (excluding from land use fee, from dividends, from benefits and from lotteries) with an increase of 12.8%, in line with the economic growth plan of 6.6%-6.8% and the inflation of about 4%. In particular, the estimated revenues of these 16 localities only increase by 13.1% compared with the estimates in 2018 (an increase of 21.2%).

Advocate for adjusting the loan structure

Regarding the ODA loan management, according to the Law on Public Debt Management adopted by the National Assembly in 2017, effective from July 1st, 2018, the negotiation and signing of the loan agreements was assigned to the Ministry of Finance instead of the 3 organizations which were the Ministry of Finance, Ministry of Planning and Investment and the State Bank of Vietnam.

In order to implement the Law on Public Debt Management, so far, the Government has promulgated guiding decrees; the Ministry of Finance has also actively coordinated with ministries, sectors, localities and donors to carry out tasks related to the newly assigned functions and tasks.

However, when the loans are received by Vietnam’s Government, the allocation and management of ODA loans have been assigned to the Ministry of Planning and Investment, which is in charge of medium-term public investment plan and annual expenditure estimates for development investment.

In fact, some foreign loan agreements which have been signed since January 1st, 2004 and others which have been being negotiated and are likely to be signed from now to 2020, are required to be disbursed but have not been included into the medium-term plan; moreover, some projects which were included in the foreign loan plan are required to be revised for investment increase. The Government has reported to the National Assembly on allowing to supplement the plan of foreign investment of about VND 60 trillion, on the basis of downward revision of the government bonds in a relevant rate to ensure the indicators of state budget deficit and public debt for the period 2016-2020 in accordance with the National Assembly’s Resolution.

Minister of Finance Dinh Tien Dung: Budget deficit and public debt are lower than the estimate being a great success VCN- On 23 October 2018, at the National Assembly's meeting on the performance of socio-economic tasks in ...

Ministry of Finance advocated for the revision and restructuring of above capital sources because the disbursement rate of government bonds over the past time was very slow, it was likely to not use up the total loans for medium-term plan, while the need for ODA in many ministries, sectors and localities is real. This revision will help to raise the efficiency of the use of capital, utilize foreign capital in the context that we are graduating from IDA (concessional loans of the World Bank) while maintaining the fiscal and budgetary disciplines.