Lifting budget overspending level won’t rescue economy: experts

Lifting budget overspending level won’t rescue economy: experts

Economists believe lifting the ceiling budget overspending level is just a temporary solution to the current budget deficit, while it won’t help in the long term.

The government is seeking the National Assembly’s approval on raising the ceiling budget overspending from 4.8 percent of GDP to 5.3 percent in 2014 so as to satisfy the capital demand for investment and development.

Minister, Chair of the Government Office Vu Duc Dam, affirmed at the recent government office meeting that the government has to increase the overspending to raise funds for development in the context of the scanty state budget.

The situation is now so serious that the Ministry of Finance suggested lowering the minimum wage by VND100,000 a month at the September government meeting so as to balance the accounts.

However, the suggestion was rejected by the Prime Minister.

Dam affirmed that the government thought carefully before making the proposal on raising the ceiling overspending level, and that the money will be spent in the most reasonable way.

However, Le Dang Doanh, a well-known economist, does not advocate the plan.

“This is an abnormal solution,” he said.

“It would be easy to mobilize capital from the public by issuing government bonds now, especially when commercial banks have profuse capital. However, the solution will not help in the long term,” he continued. “The thing Vietnam needs to do is to reduce the spending.”

Also according to Doanh, while the state budget receipts decrease, the spending still has been increasing. The regular spending has increased rapidly from 65.4 percent of the total spending in 2005 to 77.1 percent in 2012, the proportion that Doanh thinks “unbearable to the treasury of any country.”

“It’s now not the time to think about the solutions. It’s the time to take action,” he said.

Bui Kien Thanh, also a well-known economist, has warned that the lifting of the overspending level may bring side effects. He believes that the overspending level at over 5 percent would be “alarming,” affirming that the current weak economy must not be the reason to be cited to increase the public investments.

Dr. Pham The Anh, Acting Director of the Institute for Public Policies and Management, an arm of the Hanoi Economics University, also said the lifting of the budget overspending won’t be able to save the national economy.

“The lifting will not help in the long term. Once the “medicine” to stimulate the economy is cut, the economy will fall weak again,” he warned.

He went on to say that if the National Assembly allows adjusting the overspending level now, Vietnam would send a message about the inconsistency in the policy implementation.

Anh also warned that the state budget would be put under a hard pressure, if the government issues bonds in larger quantity than initially planned.

It is estimated that every year, Vietnam has to pay VND40 trillion in interests for the VND320 trillion worth of government bonds and foreign debts, which is equal to 20 percent of the spending for investment and development.

When the government launched the $1 billion bailout in 2009 to help stimulate the economy, the overspending soared to 6.9 percent of GDP, far exceeding the estimates. This then resulted to the high inflation and many other problems.

vietnamnet