Budget deficit prompts spending crackdown
Faced with a large deficit, the government is cracking down on the usage of the state budget.
Last week, the Ministry of Planning and Investment (MPI) submitted a draft prime ministerial decision to the National Assembly Standing Committee, regarding principles and norms for allocating development capital sourced from the state budget for the 2016-2020 period.
Under the draft, state budget capital will be prioritized for public-private partnership projects, while also serving as a contribution to projects funded with official development assistance (ODA). It will also be used to pay off debts for capital construction and pre-paid sums.
Such capital will also be invested in state-funded projects due for completion before December 31, 2014, but suffering from capital shortages, and unfinished projects from 2011-2015, which will be shifted to the 2016-2020 period.
Also, such capital will be used for new projects meeting all investment procedures and counter funding.
“Currently, while depending on the government’s budget, many localities have approved too many projects, and have increased capital for their existing projects without taking into account their financial contribution. This has caused delays for projects,” said Deputy Minister of Planning and Investment Nguyen Chi Dung.
According to rough statistics from the MPI’s Department of National Economic Issue, total demand for capital from ministries, sectors, provinces and cities for 2016-2020 was about US$167.7 billion, with 74% to be sourced from the state budget, and the rest from ODA.
However, after re-checking these figures, the MPI found that they were grossly exaggerated by as much as 30%. Accordingly, the total demand for capital was reduced to US$107.34 billion, with 73% set to come from the state budget, and the rest from ODA. Also according to initial statistics, the total demand for government bound-funded capital from ministries, sectors, provinces and cities for 2016-2020 was estimated to be US$70.4 billion, with 89% for new projects, and the remainder for projects that have already been provided with capital.
However, the MPI’s scrutiny of these figures revealed that the real demand was only US$65.96 billion, with 93.3% for new projects.
Meanwhile, the government can issue only about US$9.34 billion in the 2016-2020 period, with nearly 50% to be allocated to the transport sector and a quarter to be injected in the irrigation sector.
According to the MPI, this year’s first seven months saw a budget deficit of about US$ 5.37 billion cause by a reduction in state revenue and a rise in expenditure. The state budget woes have forced the government to issue US$5.37 billion in bonds.