VietNamNet Bridge – Economists have warned that the drop in the crude oil price will put pressure on the public debt, because the government will have to issue more bonds and increase borrowing.

Dr. Tran Hoang Ngan, a member of the National Assembly’s Economics Committee, said Vietnam hopes to have revenue of VND85.2 trillion for the state budget from oil exports.

Ngan said though the oil price fall will affect income, the state’s coffers will still be “safe” in 2014 as the earnings from oil exports in the first 10 months of the year was higher than what had been estimated.

As for 2015, though anticipating oil price fluctuations, Dr. Ngan is still optimistic, saying that the gains will be bigger than the losses.

The money Vietnam has to spend to import petroleum products is even bigger than the money it can earn from exporting crude oil.

As such, if the oil price continues to fall, the lower prices of petroleum products will help enterprises cut their production costs.

If so, enterprises can expect higher profits, and therefore, they will be able to pay more in tax to the state, thus helping increase state budget revenue.

Dr. Tran Duc Thanh, member of the Policy Consultative Group to the Prime Minister, while agreeing that Vietnam would benefit in the long term from the oil price decrease, noted that this will influence the state’s coffers in the immediate time.

The oil price has fallen by 30 percent to a four-year low, thus leading to a loss of revenue as 10 percent of the state budget’s revenue comes from oil exports.

Thanh has urged the government to fasten spending amidst the crude oil price decrease, or the public debts would increase uncontrollably.

“It is obvious that state budget revenue will decrease because of the lower revenue from crude oil. If so, the government will have to increase borrowing to offset the budget deficit,” Thanh said.

He estimates that the figure could be “dozens of trillions of dong”.

 “It is highly possible that the public debt would increase by one or two percent of GDP,” Thanh said.

The current public debt, as reported by the government, “is still within a safe limit”.

The Ministry of Planning and Investment has recently proposed to lift the public debt ceiling to 68 percent of GDP from 65 percent.

Thanh said it was not surprising because this reflects the current situation of the public debt.

“The public debt has been increasing very rapidly, nearly hitting the ceiling of 65 percent of GDP, and it will surely and steadily increase in the next one or two years before the government carries out reform,” Thanh said

Dat Viet