Minister of Finance Dinh Tien Dung: Budget deficit and public debt are lower than the estimate being a great success

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Minister Dinh Tien Dung at the meeting

Control budget deficit well

Minister Dinh Tien Dung said that the results of the three-year period (2016-2018), the State budget-finance sector has closely followed the solutions in Resolution 07-NQ/TW of the Politburo and Resolution 25/2016/QH14 of the National Assembly, in which, basing on the economic growth rate of 6.75% to calculate the State budget estimates for 5 years (2016-2020).

According to the Minister, over the past 3 years, the State budget revenue also exceeded the estimates. The State budget revenue reached 54-55% of total revenue of the period but the economic growth rate was at 52-53%. The capital mobilization rate for the State budget was 24.9% of GDP; revenue from taxes and fees reached 21% of GDP. The structure of domestic revenue in the total budget revenue gradually increased, by the end of 2018, reaching nearly 82% and targeting 84% by 2020. Overall, it is ensured to nearly reach the State budget estimates.

“The reason for not reaching the estimate is that Resolution 07-NQ/TW of the Politburo and Resolution 25/2016/QH 14 of the National Assembly has provided solutions to restructure State budget revenue, but the deployment is still slow. Currently, only the rate of Environmental Protection Tax is amended, and the rate of Value Added Tax, Corporate Income Tax and other taxes have not yet been deployed. If we do not set out to implement the calculated solutions, the State revenue will decrease about VND 300 trillion,”- Minister Dung said.

For the State budget expenditure, the State budget ensured the proportion of expenditures for development investment, the proportion for next year was higher than the previous year and also higher than the plan. Over the past 3 years, the State budget expenditure also increased over 26% of the total State budget expenditure, and the recurrent expenditures decreased less than 64%, meanwhile, the increase in the salaries is still implemented and the social welfare policies are handled. According to the Minister, in fact, due to the increase in local revenue, thus in the recent two years, the expenditures for development investment has increased up to 27-28%, exceeding the plan.

For the control of budget deficit and public debt, Minister Dung said that the specific number and relative number also were lower than the estimates. “This is the great success in the management over the past time.” Accordingly, the increase in public debt was controlled. The public debt in 2016 was 63.7% and decreased to 61.3% - 61.4% in 2017 and 2018, and will decline to 60.6 – 60.8% by 2020.

Also Minister Dung said that the loan term has been basically handled. Accordingly, the domestic loans from Government’s Bonds for 2011-2012 was 40%, external loans was 60%. Currently, the rate was reversed, domestic loans was 60% and the external loans was 40%, preventing the risk of high public debt, especially the exchange rate risk.

“The domestic loan term is extended, we requested to strictly comply with resolutions of the National Assembly, the domestic loan term must be 5 years or more. Since 2016 to now, 100% of over 5 year-loans took advantage of the market, so the term in the previous time was 2.98 years. Currently, the average loan term is from 13 to 14 years. In addition, the interest rates is low, If the rate in 2011-2012 was 12-13% per year and the term was from 2-3 years of the Government Bond, the current average rate is over and under 6%. In the first months in 2018, the interest rate of five-year loan was only 3% and ten-year loan was less than 4%. The interest rate is improved and lower than preferential loans from donors and international organizations,” Minister Dinh Tien Dung said.

“Reviewing the results in 3 years and evaluating the performance in 5 years, at the present day, it can be shown that if there are not big fluctuations, the National 5-year financial plan for the 2016-2020 period is basically accomplished,”-the Minister said.

Revenue from enterprise sector has not reached the estimate but has increased quite well compared to the same period

For the domestic revenue, by 2020, striving to achieve 84% of total State revenue in accordance with resolutions of Politburo and the National Assembly, in the context of the price of crude oil decreased and the revenue from this item is only 2.9% and from import and export duty is only 13% of the total State budget revenue.

“The domestic revenue is very important associated with sustainable budget revenues and the actual situation of economy in the context of integration,” the Minister said. The State budget revenues in 2018-2019 from the 3 sectors including the State owned enterprises (SOEs), FDI enterprises, and the non-state sector have not met the estimates. In 2018, the revenues from the State owned enterprises reached 97.1%; FDI enterprises reached 84.9%; and the non-state sector reached 97.8%.

However, according to the Minister, in fact, the collection rate from the 3 sectors increased quite high compared to the revenue in 2017. If compared to 2017, the revenue from the State owned enterprises increased by 9.7%; from FDI enterprises by 10.4% and from the non-state sector by 17.7%. "The overall growth of these three sectors is 12.8%. This is a positive increase compared to 2017 and the rate of economic growth and inflation" Minister Dung said.

Explaining the reason why the revenue from these sectors did not reach the estimate, Minister Dung said that the estimate in 2018 was assigned on the basis of high performance, but in fact the results were low. For example, the estimate was assigned for the State owned enterprises increased by 13.1% compared to 2017; the FDI sector increased by 30.1%, and the non-state economic sector increased by 20.4%.

“The rate of estimate assigned to 16 localities in 2018 which must be contributed to the central budget, increased by 18% compared to 2017. Specifically, the estimate assigned to Ha Noi in 2018 increased by 24.5% compared to 2017; Da Nang increased by 24.8%; Ho Chi Minh City increased by 24.5%; Binh Duong increased by 27.7%; Dong Nai increased by 19.7%, Ba Ria-Vung Tau increased by 20.5%. Therefore, the implementation of the estimates in 2018 for these 3 sectors did not reach the estimate," the Minister said.

In order to overcome this situation, in the estimate of 2019, the Ministry of Finance has adjusted the rate for localities, in which the general target for domestic revenue must be ensured, the remaining domestic revenue for fees (excluding revenue from land, lottery ..) increased by 12.8%. For example, the domestic revenue assigned for Hanoi in 2019 will increase by 12.9% (24.5% in 2018); Hai Duong 8.8%; Vinh Phuc 4.6%; Da Nang 15.6%; HCM City 12.9% (24.5% in 2018). According to the Minister, the adjustment closely follows reality but is still accordance with the country’s rate of increase in revenue. In the coming time the estimate will be continuously follow the reality.

Regarding the implementation of the medium-term public investment plan, Minister Dinh Tien Dung suggested that the medium-term investment plan must not be separated from the medium-term financial plan. "The overall goal is proposed to be adjusted but must resolutely keep the deficit and public debt of this term in accordance with the spirit of resolutions of the Politburo and the National Assembly. We assess that if by 2020 total investment exceeds about VND 100 trillion, and including in excess of VND 300 trillion from the local budget, meaning an increase in expenditure for investment development. However, the central budget will face difficulty in the balance, because if the collection policy is not revised in a timely fashion, the budget balance is able to reduce VND 300 trillion for five years," Minister Dung said.

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If the central budget faces difficulties, it will be difficult to support the localities in the medium-term plans and target programs. This is due to the decrease in revenue from crude oil and import and export duty.

The Minister of Finance affirmed that the budget deficit and public debt must be closely controlled, which is related to national financial security and prestige of Vietnam when being evaluated by international organizations. Over the past time, international organizations have upgraded Vietnam's rating because the public debt was restructured and budget deficit was closely controlled. “Therefore, the target of budget deficit and public debt must remain for 5 years and the reserve expenditure must be supplemented for ministries, branches and localities on the basis of the central budgetary balances.”