In 2015, despite the sharp oil price fall from $100 per barrel to $56.2, the yearly state budget revenue was still VND86 trillion higher than initially planned.
However, the budget deficit in the year was still big because of the sharp increase in expenditure. The total spending reached VND1,200 trillion, thus raising the budget deficit to VND256 trillion, or 6.1 percent of GDP.
The same thing continued in the first two months of 2016 when spending was VND25 trillion higher than revenue.
The total state budget revenue is not sufficient to ensure regular expenditures and debt repayment.
It plans to borrow VND25-30 trillion from the Vietnam Social Insurance in the first quarter of the year, VND10 trillion from foreign sources and issued VND76-81 trillion worth of government bonds.
As such, the total amount of money it borrows in the first quarter would be as high as VND116 trillion. And the major purpose of the borrowing is to pay off debts and spend for the development & investment.
Roughly VND50.8 trillion would be used to cover the 2016 budget deficit, while VND23.2 trillion would be used for swapping debt.
The government’s report also shows that the public debt had reached 62.2 percent of GDP by the end of 2015, nearly hitting the ceiling level of 65 percent of GDP set by the National Assembly.
Living beyond means
Bui Trinh, a renowned economist, said in order to settle the problem, it is necessary to tighten the spending.
“The budget deficit may prompt the state to try all possible means to collect more taxes from businesses, which would wear out people and businesses which are facing big difficulties,” he said.
The expert noted that he finds it difficult to understand why tax agencies always try to set higher targets in tax collection year after year, no matter how many difficulties enterprises meet.
The government strives to collect more than VND1,000 trillion in taxes this year, an increase of 14 percent compared with the previous year.
The figure is equal to 20 percent of Vietnam’s GDP predicted for 2016.
Nguyen Minh Duc from VCCI commented that this would be a great challenge as the revenue from crude oil and imports/exports is on the decrease, while it is nearly impossible to increase the collection from VAT.