Minister of Finance: Must cut deficit to reduce public debt

According to Finance Minister Dinh Tien Dung, Vietnam must continue restructuring state budget expenditures to ensure public debt safety and budget sustainability.

According to Minister of Finance Dinh Tien Dung, the Vietnamese economy is currently facing many problems that, if not resolved well, will impact macroeconomic stability and whether the set target of growth of about 6.5-7.0% per year can be achieved, in which resolving the issue of public debt is especially important.

Public debt is increasing rapidly and the structure is not good.

Specifically analyzing the issue of public debt, Minister Dinh Tien Dung said that, in addition to the rapid increase, the public debt structure is not good. Due to investment requirements, especially investment in synchronous infrastructure, in the period 2011-2015, the Vietnamese Government focused resources on developing the infrastructure system (transportation, irrigation, health care, education).

In addition to mobilizing resources from governments and international organizations, Vietnam has stepped up the mobilization of domestic resources. If in 2010, the proportion of public debt borrowed from abroad was larger than domestic debt, by 2016, the proportion of domestic debt (about 56%) was larger than foreign debt (accounting for over 43%). "This result is an important step in realizing the determination to ensure a part of the safety of Vietnam's public debt" - the Minister assessed.

Along with that, according to the Minister, in 2012-2013, the average domestic loan term was about 2.8 - 2.9 years, but by June 9, 2016, the domestic loan term increased to 5.02 years. More importantly, the interest rate mobilized in VND in the period of 2013-2014 was from 7%/year to 10%/year, even up to 12%/year, now it is only 6.7%-6.8%/year.

That is, the debt structure has been adjusted more positively. Although the amount of domestic debt has increased, the loan term has been extended and the interest rate has decreased. This is a very important step in the process of restructuring Vietnam's public debt.

The problem is that Vietnam's public debt is approaching the ceiling of 65% of GDP allowed by the National Assembly, while the Government is determined to maintain the public debt ceiling, develop a project to restructure the state budget associated with ensuring public debt safety, including solutions to restructure budget collection policies.

Looking back 5 to 7 years ago, budget revenue from crude oil and import-export tax accounted for 30% to 40% of total budget revenue, but now it is only 5% to 7%. Therefore, it is necessary to restructure revenue policy to ensure revenue for the state budget, attract foreign investment and ensure the implementation of international integration commitments.

In fact, in the period 2011-2015, although the budget revenue scale was twice that of the period 2006-2010, the total revenue from domestic sources by 2015 had reached 74%. Thanks to that, in the last 3 years, despite the reduction of tariffs according to integration and the sharp decrease in crude oil prices, the budget balance was still ensured (including 2016), without causing any major impact or disruption to the national budget.

Must cut budget deficit

Another important reason for the rapid increase in public debt, according to the Minister of Finance, is that during the 2011-2015 period, the economy was in recession, the Government's policy still ensured issues of agriculture, farmers and rural areas, and ensured social security, so many policies were issued to spend on these matters.

“Therefore, the total budget expenditure has been distorted compared to the estimate, causing regular expenditure by the end of 2015 to reach 65% of the total state budget expenditure estimate. Meanwhile, the demand for investment spending for infrastructure development is also large, so the budget deficit is high and public debt has also increased in the past 5 years,” the Minister noted.

This reality causes the proportion of state budget money for development investment and debt repayment to have limited space. The Minister affirmed: Vietnam must continue to restructure state budget expenditures towards gradually increasing development investment and debt repayment in the annual expenditure estimates, aiming at public debt safety and budget sustainability. The goal is to cut the budget deficit, thereby reducing public debt.

Another factor affecting public debt, according to Minister Dinh Tien Dung, is the management of public debt and the effective use of public debt. Therefore, in 2014, the Ministry of Finance proposed the Government to issue Directive No. 02 on strengthening the management and improving the efficiency of public debt use.

In particular, there are many contents that have been and are currently being implemented in the right direction and will strictly and effectively manage public debt, including the public debt ceiling and the effective use of public debt. For example, reviewing and submitting to the National Assembly to amend the law on public debt, adjusting Vietnam's public debt strategy to 2020 and vision to 2030 in accordance with international practices.

In particular, the Minister emphasized: “My point of view is that talking about the public debt ceiling and the budget must come from the health of the Vietnamese economy, because in 2013 and 2014, the absolute amount of debt did not change (both domestic and foreign debt), but the actual GDP value of these two years was lower than the plan when calculating the budget. This makes the relative figures on public debt increase. In 2015, the public debt figures did not change, but the estimated GDP was 4.4 million billion VND, which means public debt is 61.3% of GDP, but when the Ministry of Planning and Investment announced the actual GDP settlement, it was only nearly 4.2 million VND, so public debt increased to 62.2% of GDP”.

Promote the development of domestic production

To grow Vietnam's economy as expected, the Minister said that "there is still a lot to discuss". Because for a long time, our country's growth has relied heavily on the exploitation of mineral resources and on huge investments. When the world market declined as in the past few years, it has caused many difficulties. Therefore, finding ways to promote production in the domestic economy is very important. Both promoting the development of domestic production forces and attracting foreign investment to join forces to promote sustainable development of Vietnam's economy. From there, making the budget revenue sustainable. When the budget is good, it reflects a good economy, and on the contrary, when the budget is not good, the economy is having problems./.

According to VOV