Public debts near threshold
VietNamNet Bridge – Vietnam’s public debts are poised to reach 63% of GDP late this year and 64% next year, just a stone’s throwing from the threshold of 65% deemed by the National Assembly as menacing to the country’s financial safety.
U.S. dollar banknotes are seen on a money counter of a commercial bank in this file photo. Vietnam’s public debts are poised to reach 63% of GDP late this year and 64% next year
In a report just sent by the Government to the NA Standing Committee as input for the coming NA sitting next week, Vietnam’s public debts are said to approach 64% next year, just a razor-thin margin compared to the 65% level approved by the NA Standing Committee for the 2011-2015 period.
As such, the safety threshold will be breached in a very short time, and as such public debts are no longer seen as a threat of the future, but are looming large. However, public debts may have spilt over that threshold if all debts owed by State corporations and underwritten by the Government are taken into account, as indicated in documents at the National Assembly.
Phung Quoc Hien, chairman of the NA Finance-Budget Committee, said the method of calculating public debts is not standardized, and “the real amount of public debts must be far larger (than announced).”
“Public debts pose a threat, let alone saying the situation is very bad,” NA Chairman Nguyen Sinh Hung commented in a recent meeting of the NA Standing Committee.
Hung explained that if public debts should exceed 65% of GDP next year, both the National Assembly and the Government would find it difficult to allow for budgetary overspending, meaning investment for development will be choked off. As such, there will be little money for infrastructure development to enable Vietnam to realize its target of becoming a newly-industrialized economy by 2020.
Hien of the Finance-Budget Committee said the high ratio of public debts indicates that the State Budget is facing extreme constraints as the amount used to service such debts is high compared to the budget revenue.
The Government expects to use 31.9% of the State budget to pay public debts in 2015, far higher than the limit of 25% endorsed by the Assembly.
Vietnam’s public debts, according to Hien, are more worrying from another angle.
“Our public debts as calculated do not include sums to be used for tax refunds, debts owed to the social insurance fund, and the amount used to subsidize interest rates at the two State-owned commercial banks,” he said.
For example, the amount of wages paid to those people retiring prior to 1995 has risen to VND22.5 trillion, or over US$1 billion, this year. However, this amount, yet to be paid, has not been regarded as public debts, said Truong Thi Mai, chair of another NA committee.
Meanwhile, debts owed by State-owned enterprises have totaled VND1,600 trillion, or some US$75 billion, have not been accounted as public debts either.
The Government has proposed budgetary overspending at VND226 trillion for 2015, an increase of VND20 trillion over this year. This overspending ratio is equivalent to 5% of GDP, which will rise to 7% if the amount of VND85 trillion from Government bonds to be issued next year is taken into account.
This overspending ratio is substantially higher than the level of 4.5% approved by the National Assembly.
The overspending amount, however, has never taken into account the Government bond capital, which has accumulated to VND680 trillion as of now, or 18% of GDP, according to the State Securities Commission.
A huge problem related to public debts is that such capital sources have not been efficiently utilized, since up to 72% of the budget is used for current expenses while only 28% is used for development and for paying debts.
The Ministry of Finance recently suggested VND180 trillion for investment in 2015, while the Ministry of Planning and Investment wanted the investment for development at over VND242 trillion. The Government has finally approved the Finance Ministry’s stance, proposing the National Assembly to approve the sum of VND180 trillion for investment next year.