MPI raises spending level, but public debt remains high

MPI raises spending level, but public debt remains high

The disagreement between the Ministry of Finance (MOF) and Ministry of Planning and Investment (MPI) about budget revenue and expenditures for 2015 remains inconclusive, while economists continue to warn about over-spending.

MOF has estimated that the state budget can spend no more than VND180 trillion on investment and development projects, which would be equal to 16 percent of the total state budget’s expenditure in 2015, estimated at VND1,127.1 trillion.

Explaining the lower budget for investment and development, MOF said that state revenue in 2015 would be modest, estimated at VND901.1 trillion.

Meanwhile, MPI Minister Bui Quang Vinh said spending on investment and development in 2015 must be at least VND242 trillion to fulfill the investment plan set up by the National Assembly and ensure economic growth.

When asked to comment about MPI estimates on investment and development projects, Dinh Van Nha, deputy chair of the National Assembly’s Finance & Budget Committee, said MPI was considering the demand from local authorities and branches.

However, he was not sure if MPI had checked the local authorities’ reports to be sure that the need was real.

MPI cited the government’s Report No 283 to the National Assembly that said the total investment and development capital in 2013-2015 must be VND646 trillion.

Only VND338 trillion was spent in 2013 and 2014, or 78.5 percent of the estimates. This means that Vietnam still needs to spend VND208 trillion more to be sure it can obtain the targeted GDP growth rate.

However, Nha commented that in principle, MOF, as the agency which holds the key to the nation’s coffers, will only agree to spend certain amounts of money after it is sure that receipts are sufficient to cover expenses.

He said MOF has reasons to curb expenditures, especially when the public debts have increased rapidly.

“The debts Vietnam has to pay annually are very high. It is worrying that Vietnam now has to borrow money to pay old debts,” Nha said.

According to Nha, the state budget revenue from tax collection is decreasing (it fell by 32 percent in August 2014), while budget spending has been increasing rapidly with total expenditures in 2013 nine times higher than that in 2000.

“I think that in the current conditions, we should spend money on the production sector which can provide more sources of income to the state’s coffers, rather than on infrastructure and development projects,” Nha said.

“We have spent too much money on development projects, but these projects do not manufacture products on which the state can impose taxes to increase revenue. This explains why much money has been spent, while the state budget revenue continues to decrease,” he said.

Bui Ngoc Son, MA, from the World Economics & Politics Research Institute, noted that MPI’s demand to spend more money is “a little bit odd”.

“It is clear that MOF gives spending estimates based on state budget revenue. I don’t know the basis used by MPI to demand such high investment capital,” he said.

vietnamnet