The Government will postpone proposing a plan on wage raise for state employees to the National Assembly (NA) for consideration until the legislature’s meeting in March 2016 due to budget constraints

At a regular meeting in Hanoi last week, cabinet members shared a common view that with the overstretched budget, it would be hard to find enough funding for the pay rise, according to the Government Office.

The Government will need more time to balance budget revenue and spending and will present the wage hike plan at the NA meeting in March next year.

At a group discussion of the NA’s ongoing session in Hanoi earlier, Chairman of the NA Nguyen Sinh Hung urged the Government to adjust up salaries as pledged.

Regarding budget collections, a report of the Ministry of Finance showed total State budget revenue would pick up 7% this year over last year. While localities see an increase in budget collections, the central State budget will lose around VND31 trillion (US$1.39 billion) due to the oil price fall on global markets and a reduction in corporate income tax revenue.

Therefore, Prime Minister Nguyen Tan Dung called on relevant agencies to do all they can to increase budget collections in the two remaining months of 2015 to achieve budget collection targets for this year.

More funding planned for development

Explaining at a Government press briefing in Hanoi last week, Chairman-Minister of the Government Office Nguyen Van Nen said the Government has reported to the legislature that State budget collections for next year are estimated at VND1,014 trillion, VND103 trillion higher than this year’s target.

Next year, development investment will be VND255.75 trillion. The figure will rise to VND341.75 trillion if the VND60 trillion proceeds from Government bond sales and VND26 trillion in lottery revenue are included, making up 25.1% of total budget spending.

The Government plans to set aside part of the proceeds from sales of shares at a number of enterprises for rural development programs, central-level hospitals, reciprocal capital of the projects financed by official development assistance (ODA) loans and a flood control program in HCMC.

Asked about the Government’s plan to borrow a huge amount of money to finance a budget deficit and pay debt for the 2016-2020 period, Nen said the Government has carefully drawn up borrowing and debt servicing schemes for submission to the NA for consideration and approval. These schemes were worked out on the socio-economic situation in 2011-2015, growth projections of global and local economies and an average annual economic expansion rate of 6.5-7% in the next five years.

The schemes must ensure public debt in 2020 will not swell to more than 65% of gross domestic product (GDP) set by the NA, Government debt will not exceed 55% of GDP and external debt will not be higher than 50% of GDP. 

The Government estimated a budget deficit would average 4.9% of GDP in 2016-2020, lower than the preliminary estimate of 5.4% in 2011-2015.     

To realize the budget deficit target, the Government will make greater effort to improve the business climate and stabilize the economy to support enterprises to perform better so as to increase tax collections.

The Government will review and change capital allocations for development projects and social welfare and national programs as well as rearrange spending in every sector to reserve finances for the wage hike and other socio-economic plans.   

Planning ministry upbeat about growth

In stark contract to the budget revenue issue, a socio-economic performance report of Minister of Planning and Investment Bui Quang Vinh painted a rosy picture about the economy.

The report said budget collections from domestic sources have been good, bank loans have grown higher than deposits, credit quality has improved, and bad debt of the banking system has dropped to below 3%. The business environment has been better and industrial production has posted higher growth than many previous years.

Foreign direct investment disbursements in the past ten months reached US$11.8 billion, up 16.3% year-on-year, while total registered FDI was close to US$19.3 billion.

Regarding poverty reduction for the 2016-2020 period, Government members agreed the poverty lines in rural areas and urban areas would be VND700,000 and VND900,000 per person per month respectively.

In his closing remarks, the Prime Minister said the socio-economic performance had been encouraging in almost all sectors in the year to October.

“In the remaining months of the year, we must try to solve weaknesses and weather challenges to achieve socio-economic development targets for this year and the 2011-2015 period,” he stressed.

The challenges pointed out by the Government are lower-than-expected sales of farm produce, impacting budget collections in the period. Some key export earners declined in both export volume and revenue such as rice, coffee and tea.

On top of that, exports of domestic enterprises were in decline while their imports went up in the months of this year compared to the same period last year.

SGT