VietNamnet Bridge - Concerns about public debt arose again after the Ministry of Finance (MOF) asked for VND30 trillion from the State Bank.

Though MOF and the State Bank of Vietnam have both said that it would be legal for the State Bank to lend money to the State budget to cover its expenses, the public has not calmed down about the issue.

The HCM City Securities Company (HSC), citing the State Budget Law and State Bank Law, said the State Bank has the right to advance money for the State budget expenditure at the interest rate of zero percent. 

However, the problem is in the amount of money the finance ministry has asked for. HSC commented that the proposed VND10-15 trillion would not be worrying, but VND30 trillion is a large amount.

Bizlive quoted an HSC report as saying that the total money supply is estimated at VND5,500 trillion, which means that the sum of VND30 trillion wanted by MOF is equal to 0.54 percent of the total money supply. 

Why does MOF need money from SBV? 

MOF last week asked for a VND30 trillion loan from the central bank, but affirmed that it borrowed money not because of the state budget deficit.

However, the explanation could not satisfy economists. 

“You will only borrow money when you lack money. If you don’t lack money, there is no need to borrow,” said Pham The Anh from the Hanoi Economics University on Thoi Bao Kinh Te Sai Gon, a renowned expert in public finance.

Borrowing money, according to Anh, should be seen as a normal thing, if the State lacks money temporarily. 

The government can borrow money from the central banks and give money back after it collects taxes.

However, worries still exist. “It is okay that the State Bank said it would pay the money back within the fiscal year. However, the problem is that it’s unclear if the information about the loan would be made public,” Anh said.

“In general, central banks publicize information about how much to borrow, when and how much to pay debt. But we don’t have such information,” he said.

Is the budget deficit worrying?

Anh believes that overspending is the major reason behind the lack of money.

“Seventy percent of budget’s expenditure goes to regularly expenses, which is a high proportion,” Anh said. 

While the state needs much money to spend, its revenue from tax collection is modest. 

In previous years, when the inflation rates were high, the yearly budget revenue increased sharply by 20 percent sometimes. 

The increase is predicted to be at 6-7 percent only this year. Meanwhile, the crude oil price decrease has also affected the budget revenue.  

CV