Profligate government to blame for Vietnam missing deficit target, not lower budget revenues
Construction workers build a bridge in Hanoi. Legislators say the government should reduce unnecessary spending and save money for important infrastructure projects. Photo: Reuters
Vietnamese legislators are holding the government squarely responsible for the budget deficit exceeding the annual target this year, saying the primary factor is a lack of fiscal discipline.
The state budget deficit as of mid-October was estimated at VND155 trillion (US$7.4 billion) by the General Statistics Office. That is 10.7 percent higher than the target for the whole year approved by the National Assembly.
According to the GSO, the shortfall was due to economic difficulties that resulted in lower than expected revenues in the period, less than 70 percent of the annual target.
While members of the legislative body agreed that tax revenues have fallen sharply, they still maintain it was the government's failure to cut back on spending that led to the high budget deficit.
Phung Quoc Hien, chairman of the Finance and Budget Committee, said overspending was serious in the area of public projects.
Even though the government has tightened investment policy, there was still wasteful disbursement of state capital in many projects in the first nine months, he said.
Government agencies also continued to spend a lot of money on ceremonies, meetings and overseas trips while critical areas like the environment, education and healthcare did not receive the money they deserved, Hien said.
This is a problem of lax fiscal discipline, he said.
"The National Assembly always advocates thrifty spending, especially in current expenditures. But spending on many events and cars is often higher than estimates," Hien said.
There is always high demand for money and oversight weaknesses will enable lavish spending to continue, he warned.
"We demand that the government tries to achieve approved fiscal targets"¦ Many small outlays will amount to a really large sum," Hien said.
"This time we insist that current expenditures on properties, trips, meetings and ceremonies have to be cut," he said, adding that this is one of the goals that legislators will set for the government at the ongoing National Assembly session.
Prime Minister Nguyen Tan Dung said last week that the government aims to cap the budget deficit at 4.8 percent of gross domestic product next year. The economy is expected to grow 5.5 percent.
The deficit has stayed around 4.8-4.9 percent of GDP in recent years. The government said last year that it aims to reduce the ratio to 4.5 percent by 2015.
The Asian Development Bank said in a report in October that after acting to rein in inflation and stabilize the economy in 2011, the Vietnamese government has eased monetary and fiscal policies to support growth.
"Government spending from the budget increased by 4.8 percent in real terms in the first half, while total revenue excluding grants fell by 5.5 percent," the Manila-based bank said.
"Revenue fell short of the target because of lower corporate income and trade tax collections," the bank said, adding that the government has offered tax relief to local businesses this year.
It noted that oil revenues rose, owing to prices higher than projected for domestic crude oil.
Vietnam is likely to relax fiscal policy next year, the bank said.
The government is aiming to keep budget deficit at 4.8 percent of GDP this year, Vu Duc Dam, chairman of the government's office, said at a press briefing Sunday.
Dam said the country needs a large amount of money for infrastructure and social projects.
So the only options are increasing revenues and cutting spending at government agencies, in order to have enough money for public projects, he said. "Spending for overseas trips has to be tightly controlled, from central to provincial government agencies, and many other expenses have to be reduced too."
Tran Du Lich, a member of the National Assembly Economic Committee, said the government has said many times that it will downsize its administrative system to cut costs, but in fact the organization keeps expanding.
"Expenditures have to be slashed by at least 10 percent because there are many cases of excessive spending now," he said.
"While it is necessary to develop public projects, the government should delay projects that are not really urgent to focus mainly on building roads, schools and hospitals," he said.
Nguyen Hoang Hai, general secretary of the Vietnam Association of Financial Investors, said the budget deficit in Vietnam remains high simply because of wasteful spending.
"A lot of money has been lost because of corruption and unnecessary projects, causing a constant deficit," he said.
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