According to the Government’s report, several new factors could also destablise the macrcoeconomy, therefore, top priority must be given to ensure stability so the national economy can grow in a sustainable manner.

In recent years, Vietnam’s budget overspending has always been at a high level, accounting for 5 percent of the country’s GDP in 2005-2008 and 6.9 percent in 2009, equivalent to VND115,900 billion.

The record high in 2009 was partly attributable to the Government using economic stimulus package of VND145,000 billion and other amounts to ensure social welfares in the face of the global economic downturn.

On the other hand, many localities want to attract investment from different sources, particularly, from the State budget to boost economic development, which lead to the rise in the budget overspending.

Vietnam’s Incremental Capital Output Ratio (ICOR) which is based on the percentage of GDP needed to enable the GDP to grow by 5.2 percent in 2007, 6.6 percent in 2008 and over 8 percent in 2009. This indicates that the efficiency of investment is poor.

The State Audit’s results show a wastage in spending. Recently, the State Audit proposed increasing the collection of revenue by more than VND 4,160 billion and dropping cutting by VND2,700 billion.

The appraisal from the National Assembly (NA)’s Finance and Budget Commission presented at the ongoing 7^th session pointed out that the regular spending of State agencies has still increased while there remain scattered investment here and there. If spending continues, the Government will have to generate resources by encouraging people to buy bonds or by borrowing foreign capital.

The high rate of spending combined with ineffective investments will ultimately result in the return of higher inflation.

The Government debt has also soared, from 33.8 percent of GDP in 2007 to 36.2 percent in 2008 and 41.9 percent in 2009. It is predicted that the Government debt will account for 44.6 percent of GDP as a result of the spending jumping to 5 percent of GDP.

If the increase in the national debt continues, both domestic and foreign capital borrowing will have to endure high interest rates which will endanger the nation’s financial security over the next few years.

Consequently, the Government should abandon prolonged and ineffective projects and limit large-scale projects to avoid risks, if the capital resources are not adequate.

Restructuring the budget, reducing spending and paying off the government debt are urgent tasks and need to be addressed in the near future.