National Assembly Committees warn of over-expenditures, public debt increases
After Vietnam launches a stimulus package by pumping more money into the economy, increases in over-expenditures and public debt are expected to occur.
Pham Thi Hong Yen, Member of the National Assembly Economics Committee
At a press conference on December 30 about the first extraordinary session of the 15th National Assembly, reporters raised questions about the resolution on fiscal and monetary policies.
Pham Thi Hong Yen, Member of the National Assembly Economics Committee, said the resolution needs to follow the principle of closely following the Party's guideline, focusing on strengthening aggregate supply and aggregate demand, with priority given to aggregate supply.
The monetary and fiscal policies need to be flexible, strict and harmonious in order to opt imize the use of resources.
The fiscal and monetary policies need to be large enough to solve urgent questions and avoid waste in using resources.
Programs and solutions will be designed and implemented quickly, ensuring the maximum absorption of resources. This will be implemented mostly in 2022 and 2023.
When implementing fiscal and monetary policy packages, Vietnam needs to ensure the major balances of the economy, and satisfy immediate and long-term needs, with association with economic restructuring in 2021-2025.
“One of the most important tasks is mobilizing and managing resources in a reasonable, transparent and open way, with no wrongdoings and group interests,” Yen said.
To implement economic recovery and development, five major solutions will be used.
First, opening the economy and calling for investments, as well as improving the healthcare sector’s capability to prevent the spread of the pandemic.
Second, ensuring social security and employment.
Third, supporting public investments and the recovery of businesses, cooperatives and business households.
Fourth, developing infrastructure, and exploiting the society’s resources for investment and development.
Fifth, carrying out institutional reform, administrative reform, and improvement of the business environment.
“As such, the socio-economic recovery and development program basically covers all fields of economic life, with priority given to the healthcare sector, in association with the master plan on Covid-19 prevention and control. The solutions are designed in a way to ensure efficiency and spillover effects, and fit the new circumstances,” she said.
Answering questions about worries about public debt and over-expenditure increases after the policy packages, Nguyen Huu Toan, Deputy Chair of the National Assembly Finance and Budget Committee said public debt and over-expenditures are important to national financial security.
When the economy develops, the fiscal and monetary policies need to be designed to prevent overly hot growth and ensure sustainable development. When there are signs of recession, it’s necessary to use more resources to stimulate the economy. This is a counter-cyclical economic policy.
Toan said setting an overly high expenditure level and using too much money for the economic stimulus program would affect national finance and macro uncertainties.
In case of mismanagement, the stimulus package would backfire, because the money supply increase may trigger high inflation. Once goods prices increase, this will affect macro stability. This is the question that that needs thorough consideration and cautious management.
Vietnam obtained a GDP growth rate of 2.91 percent in 2020. The situation got better in H1 2021. However, the fourth wave recurrence led to a sharp fall in Q3, which led to the low GDP cost of 2.58 percent this year.
Vietnam GDP positive growth rates over the last two years are highly appreciated. However, there still should be more policies to stimulate the economy and obtain positive growth rates in the next years of the development cycle.
Toan stressed that ensuring macroeconomic stability is the supreme principle when designing fiscal and monetary policies.
“When we launch the economic stimulus package, more money will be pumped into the economy. The over-expenditures and public debts will increase. It’s necessary to calculate thoroughly to set the over-expenditures at a reasonable level, depending on the capital absorption capability of the economy, so as to both encourage growth and maintain macro balance stabilization,” he said.
Thu Hang - Tran Thuong
National Assembly deputies have recommended that the Government design an economic stimulus package, but both the Government and the National Assembly have yet to discuss the topic.
All four ministers of economy-related fields were asked to answer inquiries at the last National Assembly session, a rare occurrence in Vietnam.