The Government has mapped out a budget plan for 2016-2020 with a 1.65-fold increase in revenues despite lower-than-expected results in the past five years.

To implement the financial plan for the five years from 2016 to 2020 with average economic growth of 6.75% per year, the Government has set out revenue figures with a sharp rise from the previous period.

While the annual growth target for the past five years is 6.5-6.7%, an average of 5.91% has been actually achieved. Even the goal of 6.5% for this year seems out of reach due to slower growth in the previous quarters.

Therefore, the growth forecast for the next five years is still uncertain. Meanwhile, the lackluster performance of economic restructuring will directly affect budget collections, spending shakeup and probably give rise to potential repayment obligations that may push up public debt.

Attaining the budget collection goal will be certainly a tough task in the years to come since the nation’s deep integration will lead to tariff cuts as a result of free trade agreements. The global oil price is currently low and unpredictable, whereas the annual budget estimates partly depend on crude oil exports and import-export taxes.

The Government presented an objective that the budget revenue would stand at 20-22% of GDP in 2016-2020. The Committee on Financial and Budgetary Affairs of the National Assembly (NA) commented this percentage was still low and proposed it be raised to 23.8%, in which revenues from taxes and charges should make up 21.8%.

The NA committee agreed with the Government’s proposal for allocation of VND2,000 trillion for investment and development in the next five years, accounting for 25-26% of total budget expenditures. Such spending will depend largely on annual budget revenues and the specific levels will be decided by the NA on a yearly basis.

On the financial plan for 2011-2015, the NA finance and budget committee remarked the income from taxes and charges amounted to 20-21% of GDP, lower than the set target (less than 22-23%). Budget collections significantly declined from the previous period.

Boosting domestic revenues is a must to reduce dependence on unstable earnings from external sources. While many expenses were much higher than estimated, capital for investment and development in 2011-2015 went down sharply from the preceding period, only 18.2% of the total expenditure versus 24.4% (2006-2010).

The budget deficit has stayed high in the past five years, around 5.76% of GDP, whereas the target was 4.5% for 2015, including government bonds. Overspending was partly ascribed to principal payments.

Notably, though public debt had remained at safe levels by the end of 2015, 50.3% of GDP, it should be higher with other liabilities factored in, such as the social insurance fund, debt owed by infrastructure projects and the obligations of Vietnam Development Bank and Vietnam Bank for Social Policies.

The NA finance and budget committee said domestic debts were rapidly piling up, with short-term loans taking up a major proportion. Debt swap tends to pick up at a greater speed, totaling some VND47 trillion in 2013, VND106 trillion in 2014 and VND145 trillion in 2015.

SGT