State budget under siege

VietNamNet Bridge – Investment from the State budget is falling to a dangerous ratio, menacing the country’s sustainable development, but the Finance Ministry asserted there is no way to raise it as the State coffer is now under siege.

State budget, State coffer, amended Law on State Budget

The Finance Ministry in a fresh report rejected proposals from other agencies to raise the proportion of the State budget for investment, saying various expenses are piling huge pressure on the central budget.

The Ministry of Justice, in a report appraising the amended Law on State Budget that is due to be passed at the ongoing National Assembly sitting, suggested ways to increase investment in development.

According to the Ministry of Justice, the planned budget deficit – at 5% of GDP – as well as all revenue collected from land use and part of the natural resource income must be earmarked for State investment.

Such a shift will ensure a healthy balance for the State budget as up to two-thirds of the budget is now for routine expenditures, especially the State payroll and social security programs, the Ministry of Justice reasoned.

However, the Finance Ministry poured cold water on the Justice Ministry for this proposal.

“It is inappropriate to have articles in the (amended) Law on State Budget that allow all the budget overspending plus other revenue sources to be used for investment,” the Finance Ministry responded in a report.

The Finance Ministry’s stance likely stokes concerns, after senior officials and experts have voiced their frustration over falling spending on development investments at the National Assembly sitting in Hanoi this week.

Other priorities prevail

As explained by the Finance Ministry, investment principles and priority orders must be considered in each period and each year in order that they are aligned with the strategic goals of the Party and State.

In recent times, there have been resolutions on social policies, wage reform, health, education and training, national defense and security, forcing the Government to secure expenses for these programs.

In addition, the National Assembly has released resolutions on budget allocation ratios such as 20% on education and training, 2% on science and technology, and budget increase for healthcare.

Spending for other priorities has increased quickly due to the expansion of social programs over the past time, the ministry said.

Meanwhile, debt payment pressure has risen steadily due to rising borrowings for funding overspending and government bonds. The nation borrowed VND162 trillion in 2011, VND250 trillion in 2012, VND320 trillion in 2013 and VND400 trillion in 2014.

The Government had to borrow more in 2013 and 2014 to service mature loans, as the amount set aside to settle debts fell short of the real repayment demand, according to the Finance Ministry.

Investment for development trivial

Due to the rising expenses for various social programs and the debt pressure, the amount set aside for investment has tumbled over the past couple of years, although the Finance Minister reiterated that it has prioritized State investment.

In the State budget estimates in recent years, the Finance Ministry has frozen many sums payable to have more capital for development.

The State budget balance, in fact, has been worsening in recent years. This year, up to 72% of the State budget is disbursed for routine expenses, 26% is used to pay or service debts, while only a trivial proportion is for State investment.

Speaking at a group discussion within the framework of the NA sitting on Tuesday, Minister of Planning and Investment Bui Quang Vinh warned that investment for development has never tumbled to a new low like now.

According to Vinh, the current Law on State Budget specifies that the budget overspending must be used all for development investment. However, out of the VND226 trillion of budget overspending planned for next year, only VND195 trillion is set aside for State investment, he said.

The minister complained that expenses for social security programs are increasing faster than the growth of budget income, while allocations for constant expenses are also rising faster than investments.


State budget, State coffer, amended Law on State Budget