As Vietnam’s public debt continues to rise, austerity measures should be introduced to tackle the issue in the long run, a senior deputy of the lawmaking National Assembly said at a meeting in Hanoi on Tuesday.
Total public debt is expected to reach VND2,700 trillion (US$121.5 billion) by the end of this year, marking an average annual growth rate of 20 percent in the last five years, said Tran Van, deputy chairman of the National Assembly Committee on Finance and Budget.
As a result, Van proposed the National Assembly and the government consider applying the ratified budget overspend of VND254 trillion ($11.43 billion) in 2016 to the 2017-19 period, instead of an annual increase in accordance with GDP growth, to gradually reduce deficit expenditure.
Additionally, there should be no further increase in state positions over the period to lower significantly the number of state employees, in parallel with the administrative reform and implementation of an e-government roadmap, he added.
The legislature and the central government should also put an end to unnecessary construction works and projects nationwide, said Van, a deputy from the southernmost province of Ca Mau.
"I think it's high time we had to voluntarily tighten our belts before being forced to do so at the request of foreign financial institutions,” the deputy chairperson said.
Unbalancing budget
The state budget deficit has increased continuously above five percent of the country’s GDP annually, said Van.
Vietnam’s GDP in 2014 was over $187 billion, and is projected to top $202 billion this year, according to official figures.
In terms of absolute value, the budget overspend rose from VND112 trillion ($5.4 billion) in 2011 to VND226 trillion ($10.17 billion) in 2015.
But the budget imbalance has excluded other kinds of debt, including government bonds and official development assistance (ODA) loans, which hit VND85 trillion ($3.82 billion) and VND30 trillion ($1.35 billion) respectively in 2015, Van said.
Therefore, the public debt increased rapidly, averaging 20 percent per year, from around VND1,300 trillion ($58.5 billion) in 2011 to the $121.5 billion mark in 2015, according to the vice chief of the finance and budget committee.
Meanwhile, since 2013, Vietnam has not found enough financial resources to repay the interest of the government’s borrowing, so the country has had to ‘rob Peter to pay Paul’ with higher loans year by year, Van added.
For example, from VND40 trillion ($1.8 billion) in 2013, the number rose to VND77 trillion ($3.46 billion) in 2014, and then from that figure to VND125 trillion ($5.62 billion) in 2015.
"It is hard to say that the situation is still developing smoothly when we cannot repay due debt, but rather restructure the debt by extending the lending terms," Van asserted.
The legislator also pointed out that the increasing expenditure in investment, mainly financed by loans rather than the savings of the economy, has gradually become a burden on the state budget.
Moreover, recurrent expenditure on the state apparatus including state officials and employees has yet to shrink, attributed to the low efficacy of many state-managed agencies, limited capability of state employees, and cumbersome administrative procedures, he added.
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