VietNamNet Bridge – The issue of the national budget, always the subject of public attention at each session of the National Assembly, has become more important as the Government struggles to balance the budget.

During a group discussion on economic - social issues last week, the Minister of Planning and Investment Bui Quang Vinh said that after clearing the accounts, the state budget in 2016 will have only VND45 trillion. 

According to Vinh, if Vietnam uses this amount to pay debt, it will almost have nothing in the pocket.

Budget revenue has become an urgent problem. The price for crude oil on the world market fluctuates unpredictably, exports of agricultural products has fallen, revenue from import duties is in a downtrend along with the implementation of free trade agreements ... These are a burden on the budget input.

As reported by the Central Institute for Economic Management (CIEM), total budget revenue in the third quarter of 2015 reached VND236.9 trillion, an increase of nearly 7% over the same period last year. However, compared to GDP, the rate was only 22%, lower than the first and second quarter and equivalent to the same period of 2014. This showed that the budget revenue growth was slow compared with the recovery of economic growth.

Issuing bonds is an option to compensate for the shortage of revenue, but it also faces challenge. 

The value of government bonds issued in the third quarter reached nearly VND21.500 trillion, up 13% compared with the second quarter but down more than 60% over the same period of 2014. 

The Vietnam Economic Policy Research Institute said that the plan to issue VND250 trillion of government bonds in 2015 faces many obstacles, derived from inappropriate bond maturity, low inflation, high liquidity ... which discourage investors to hold this kind of valuable paper.

In this circumstance, the temporary solutions to mobilize resources for the budget are expected to rise to nearly $5.5 billion. 

Specifically, in the third quarter of 2015, the budget borrowed VND30 trillion ($1.3 billion) from the State Bank of Vietnam (SBV) to offset liquidity, on condition that the repayment must be made within the year. 

Besides, the issuance of foreign currency bonds worth $1 billion for the Bank for Foreign Trade of (Vietcombank) has been also disbursed.

After the mobilization of domestic resources, the Government is considering issuing $3 billion in international bonds to restructure the debt portfolio.

Related to more than VND363 trillion of mature bonds in 2015-2016, the Government has asked the National Assembly’s permission to issue international bonds, firstly $3 billion, and more in the medium and long term to restructure debt and offset the shortage of foreign capital as preferential loans fall.

However, experts said that the existing measures are only temporary and they have limitations. 

Specifically, the issuance of US$1 billion of bonds for Vietcombank may affect the operation of the foreign currency market at the time of release, the time of disbursement and maturity. 

The short-term loans of VND30 trillion from the State Bank of Vietnam helps reduce the pressure in the third quarter, but it may put extra pressure on the budget in the fourth quarter, especially prior to the repayment.

Tran Anh Duong, Deputy Head of the Macroeconomics Department of CIEM, said the budget cannot depend forever on the issuance of bonds and borrowing new loans to pay for the old debt. 

Duong said the Ministry of Finance had borrowed from Vietcombank and the State Bank of Vietnam and it would be a problem when the debt matures, especially when the VND30 trillion wil be due later this year, when the public debt is expected to be equivalent to 63% of GDP.

“The provisional lending operations for public debt is almost at the threshold. Increasing budget revenue is difficult to help resolve the tension and even adversely affects the recovery of economic growth," Duong said.

To solve the problems of budget, CIEM said the important point is to ensure budget discipline. Without drastic cuts in budget expenditures, fiscal operating pressure will be tense in the fourth quarter of 2015 and possibly in subsequent years.

Recently the government has tightened government procurement, the use of public vehicles, which according to Mr. Tran Duc Thang, Director of the Public Assets Management Department under the Ministry of Finance, can help save about VND 500 billion ($25 million) per year.

The agency calculated that the country has nearly 40,000 public cars, not including vehicles in the armed forces and State enterprises. The annual cost of using a car averages VND 320 million, so the estimated annual cost to operate public vehicles can reach VND 12.8 trillion.

$1 = VND22,500

Na Son