Vietnam’s state budget deficit will grow next year with increased state spending on key development projects, but revenues from crude oil will drop, as planned, to maintain sustainable use of the nation’s natural resources.
With a three-fourths majority vote for the government’s draft budget spending plan, Vietnam’s top legislative body, the National Assembly last week approved a deficit of 5 per cent of GDP value.
The government’s projected figures put state revenues at VND281.9 trillion ($17.6 billion) or one-quarter of the GDP for 2007. The sum is set to increase by VND19 trillion ($1.19 billion) transferred from this year. In a move to reduce the state’s reliance on revenues from exported natural resources, hotly debated at the meeting, the National Assembly also agreed to cut the nation’s crude oil output from 18 million tonnes this year to 17.5 million tonnes in 2007. The country will also spend VND354.9 trillion ($22.2 billion) from the state budget between January and December next year. Most of the deputies at the 10th session of the 11th National Assembly argued that despite an 18-20 per cent increase per year in state revenues over the last few years, much higher than that of GDP growth and inflation, state spending has been steadily increasing. Minister of Finance Vu Van Ninh calculated that the deficit hovered around VND56.9 trillion ($3.6 billion) in 2007, most of which will be set aside for paying debts. National reserves will be used for disasters and emergency needs.
According to the government report delivered at the session, deficit would be pegged at VND48.5 trillion ($3.03 billion) in 2006. Ninh said: “Despite the slight increase, the state budget deficit [5 per cent of the nation’s GDP] is acceptable in the context that Vietnam is in need of investment capital to spend on an increasing number of socio-economic development projects. It is also good to know that Vietnam does not have any bad debts and the government has kept an excellent track record on debt payment schedules. The nation’s outstanding debts are estimated at 31.2 per cent of GDP by the end of next year and the figure is absolutely within security limits.”
But, figures amounting to $42 billion in overseas debts may still raise eyebrows.
“We have the right to be optimistic but it should be not over-optimism,” said deputy Nguyen Ba Thanh from Danang, adding that the government still has to control the budget deficit by rallying to fight waste and corruption.
Analysts have forecast Vietnam’s economic growth in 2007 will be in the range of 8.2 to 8.5 per cent compared with an expected 8.2 per cent this year.
No. 786/November 6-12, 2006