Continued pressure from the PM

Attending the patriotic emulation conference of the finance sector recently, Prime Minister (PM) Nguyen Xuan Phuc showed his satisfaction about the fiscal policy which became tighter after a long period of expansion.

He praised the state budget management efficiency which could be seen in the budget scale expansion and the decrease in public debt, which allows the state to have more money to spend on investment and development.

At the recent ceremony on awarding the State President’s decision on appointing Nguyen Thi Hong to the post of Governor of the State Bank of Vietnam, Phuc repeated that the most important task of the banking sector was controlling inflation, stabilizing the macro economy and stabilizing the Vietnam dong.

“The macroeconomic foundation has been consolidated after painful ups and downs,” said Tran Dinh Thien, a respected economist.

His comment shows the results of great efforts to implement the key targets seen in all government’s annual resolutions No 1: “Stabilizing macro economy; controlling inflation; and increasing productivity, quality and efficiency, competitiveness, internal strength and the autonomy of the economy.”

Fiscal and monetary policies have been adjusted and tightened to observe the spirit of highlighting macrostability.

Receipts up, debts down

Until 2016, the fiscal year had been loose and most of the state budget was just enough for regular expenses to feed the apparatus, while spending on investment and development relied on borrowing.

The loose fiscal policy contributed to an inflation increase: the average CPI increased by 7.65 percent in 2011-2015.

In such conditions, in November 2016, the NA Chair signed Resolution 25/2016/QH14 with stricter requirements.

Under the resolution, the finance sector has to step by step restructure state budget spending by increasing the proportion of spending on investment and development to 25-26 percent of total budget expenditures; reduce the proportion of regular spending to below 64 percent of total expenditure; and prioritize the debt payment and national reserves.

This is a lot of pressure on Minister of Finance Dinh Tien Dung. For a long time, the finance sector has focused on implementing resolutions to help ensure macroeconomic stability, one of the outstanding achievements of the government.

Macroeconomic stability and low inflation are the results of persistent management efforts in recent years that aim to make people and businesses feel secure when making investments.

The government’s report to the National Assembly at the last session showed that mobilization to the state budget was 24.5 percent, and that the receipt/expenditure structure went better; the proportion of collections from domestic sources increased from 68 percent in 2011-2015 to 80.9 percent in 2016-2019, and is estimated to reach 84.3 percent this year.

The estimated spending on investment and development this year is expected to account for 27-28 percent, while regular expenditures are expected to reduce to 60.5 percent.

Monetary policy ‘flexible, cautious’

In response to the PM’s request at the appointment ceremony, Governor Nguyen Thi Hong committed that the banking sector will fulfill the tasks of controlling inflation, stabilizing the macro economy and ensuring the safety of the whole banking system.

The growth of the total payment means has been curbed at lower rates than in previous years. The figure was 14.74 percent in 2016-2019, lower than the 17.45 percent in 2011-2015.

3-year foundation

Thien affirmed that the healthy financial situation has made a great contribution to stabilizing the economy amid Covid-19.

There have been uncertainties in the world in the last three years, especially the US-China conflict. As China sees its growth rate decrease, this has led to a decline all over the world. In such conditions, Vietnam is still accelerating global integration.

“There had to be a foundation for three years for us to obtain today’s achievements. If we had not had reserved strong internal strength, we would not have been able to stand firmly in 2020,” he commented.

Fighting pandemic and developing economy at same time

The PM statement that Vietnam has to implement the dual tasks of fighting the pandemic and developing the economy at the same time is an imperative for fiscal and monetary policies.

A series of policies to stimulate demand have been issued.

Presenting before the NA, the PM affirmed that Vietnam continues to maintain the macroeconomic foundation in the context of serious fluctuations in the world and regional situation.

Those individuals and businesses who once experienced inflation rates and saw their money losing value day by day can understand the value of macro stability and dong value stabilization.

Macro stabilization is the foundation for development and market confidence. Macroeconomic stability, inflation control and strengthening people’s confidence are among the most successful economic policies in the past five years.

Despite Covid-19, Vietnam still gained an average annual GDP growth rate of 5.9 percent in the 2016-2020 period, and was among the fastest growing economies in the world. 

Tu Hoang

Evaluating and estimating state budget to reduce deficit and increase efficiency

According to Minister of Finance Dinh Tien Dung’s latest report delivered recently at the National Assembly (NA), Vietnam achieved most of its financial goals in the last four years, including for 2020.

State budget revenue hits 98 per cent of annual target

More than VND1.48 quadrillion (US$64.2 billion) was collected for the State budget in 2020, equivalent to 98 per cent of the target, according to the Ministry of Finance.