The budget for the next 5 years will only meet 30% of investment needs.

For the first time, the Government has submitted to the National Assembly a report on the medium-term development investment plan (2016-2020). According to this report, it is expected that in the next 5 years, the state budget mobilized from various sources will only be able to meet 30% of the country's investment capital needs.

The state budget for the next 5 years will only prioritize debt repayment and seed capital for investment in large infrastructure projects. Photo: Noi Bai-Lao Cai Expressway from Japan's ODA capital

According to the report of Minister of Planning and Investment Bui Quang Vinh, total development investment capital in the period of 2011-2015 increased slowly and then decreased sharply due to economic recession, tightening of public investment and capital of other economic sectors also decreased. Total social investment capital in the past 5 years reached 5,617 trillion VND, an increase of 1.8 times compared to the period of 2006-2010.

The average capital mobilization ratio compared to GDP over the past 5 years reached 31.2%, lower than the previous plan of 33.5% to 35%.

Also during this period, the Development Bank (VDB) signed a cooperation agreement with over 30 commercial banks in the field of credit guarantees for enterprises. VDB issued guarantee certificates for 1,536 projects/business production plans with a total amount of VND 10,700 billion, but up to now, VDB has had to pay debts on behalf of 86 projects/loans with an amount of nearly VND 400 billion.

To improve the quality of planning for public investment projects, especially after the Law on Public Investment took effect in early 2015, the Ministry of Planning and Investment has developed a medium-term investment plan for the National Assembly to consider.

The total social development investment capital for the 5 years 2016-2020 is expected to be about 10,506 trillion VND (nearly 470 billion USD at the current exchange rate), accounting for about 31% of GDP. Of which, the development investment capital from the budget for this period is expected to be at least 1,679 trillion VND.

Meanwhile, the total demand for development investment capital from this source proposed by ministries, branches and central government is about 3,710 trillion VND, 19 times higher than the 2015 plan and 2.2 times higher than the capital balance capacity for that 5 year period. According to calculations, the actual budget for this period can only meet 30% as mentioned above.

With the budget resources continuing to be tight and having to be allocated to priority targets, the Ministry of Planning and Investment plans to prioritize paying off the basic outstanding debts of the central budget by the end of 2014. According to Directive 1792/2011 of the Government on strengthening the management of public investment capital and government bond capital, each year the local budget must set aside 30% to pay off outstanding debts for basic construction (if any) in order to complete the debt-free target by the end of 2020.

By the end of 2014, central and local ministries still owed nearly 20,000 billion VND. Of this, central ministries and sectors owed about 4,301 billion VND, and more than half of this debt was owed by the Ministry of Transport. Localities owed about 15,370 billion VND.

On the other hand, the advanced capital from the central budget has not been able to recover approximately 60,000 billion VND so far (34,000 billion VND is not recovered from localities).

The Ministry of Planning and Investment believes that with the tight budget situation, budget capital is only considered a supporting and supplementary source of capital to promote other social capital sources to invest in infrastructure, national target programs, and large projects.

Therefore, in addition to prioritizing the repayment of outstanding construction debts, capital will only be allocated for national target programs and projects that are about to be completed. The Government will continue not to allocate capital for new projects that have not completed investment procedures, have spread out investments, or have unbalanced payment sources.

According to TBKTSG