Budget deficit rising: GSO

Total budget revenue in the period reached VND425.6 trillion, equal to 42 percent of estimates. Of the total, domestic revenues (excluding oil revenues) contributed VND342.8 trillion, oil revenues VND17.7 trillion and revenue from export-import VND63 trillion. 

Budget spending, meanwhile, hit VND508.5 trillion. The country spent VND68 trillion on the repayment of debt and provision of aid. It also disbursed VND74.5 trillion for development investment and VND363.4 trillion for recurrent expenditures, including administrative governance and national defence. 

Recurrent expenditures accounted for 65% of the country’s total spending, up from 50% last year, according to the Ministry of Planning and Investment. 

Expenditures for development investment, meanwhile, dropped to 17% from last year’s 30%. 

The Government planned to borrow VND452 trillion this year through G-bonds and official development assistance (ODA), of which VND254 trillion will be used to offset the deficit. 

Under the plan, estimates for debt payment this year are also expected to rise to VND273 trillion from VND148.3 trillion in 2015. 

The Ministry of Finance forecast the deficit would reach 4.95% of the GDP this year; however, international economic organisations have forecast a much higher rate. 

HSBC predicts the budget deficit will rise to 6.6% of the GDP in 2016, raising the ratio of public debt to GDP to a 64.5% threshold due to the high public debt ratio and falling oil price. 

The growing debt problem is aggravated by slowing inflation (affecting the nominal GDP) and Vietnam’s currency devaluation (increasing the value of foreign debt). 

The ratio of public debt to GDP increased from 59.6% in 2014 to 63.3% in 2015, and the World Bank forecast the ratio would rise to 63.8%, 64.4% and 64.7% in 2016, 2017 and 2018, respectively. 

Experts have recommended that the Government stabilise recurrent spending and adopt tough measures to curtail spending and increase collection.