VietNamNet Bridge – Vietnam will have to spend VND150 trillion, or nearly US$7.1 billion, repaying for financial aid, short-term loans and domestic borrowings next year, according to Minister of Finance Dinh Tien Dung.

Presenting a report on State budget estimates and allocations next year, Dung said the Government proposed a budget deficit of 5% of gross domestic product (GDP) in 2015, or around VND226 trillion.

Next year, public debt is estimated at 64.5% of GDP, which is claimed to be in safe territory and lower than the upper limit of 65% approved by the National Assembly (NA), Dung said.

This year, the budget deficit is projected at VND224 trillion, or 5.3% of GDP, while the surplus budget collections are estimated at VND52 trillion. The sum will be used to pay debts and spend on some urgent plans such as national defense, security and social welfare, Dung added.

However, chairman of the NA Finance and Budget Committee Phung Quoc Hien was concerned about the situation, saying that the spending on human development, science and technology is in decline.

Expenditures for development investments have slid quickly, going against the principle that development investments must be higher than the State budget deficit. Besides, the Government has not been able to implement wage reform as scheduled.

Regarding the budget deficit of 5% of GDP next year, Hien said, the ratio must be 7% if VND85 trillion worth of government bonds is included.

This means that the Government has failed to realize the five-year socio-economic development plan approved by the NA, which allows a budget overspending ratio including government bond debt at only 4.5% of GDP.

However, most deputies have agreed with the Government’s plan given the current economic difficulties. However, the Government should set up a roadmap to cut overspending and secure the nation’s financial safety, Hien urged.

The committee also said public debt is just a razor-thin margin compared to the 65% level approved by the NA. This suggests that debt payment is piling huge pressure on the central State budget.

In a group discussion at the NA session on October 21, Deputy Prime Minister Vu Van Ninh said that routine spending has risen fast, especially after the Government presented to the NA large infrastructure projects to upgrade national highways 1A and 14.

The projects were presented after the nation had drawn up a bond issue plan of VND225 trillion in 2011-2015. In late 2013 and early 2014, the NA allowed an extra VND170 trillion worth of debt paper to be issued from now to 2016 to fund the two roads.

This is the main reason of the strong rise of public debt. It will take the nation several years to deal with the problem, said Ninh, who formerly served as Minister of Finance.

For the debt structure in 2010, Ninh said foreign debt accounted for 60% while domestic debt around 40%. Last year, foreign debt was 50%, domestic debt 49% plus government-guaranteed loans.

Ninh said debt had been rising strongly in recent years. The debt-to-GDP ratio is just a target but what matters most is that whether the nation could pay debt or not.

SGT/VNN