Ministry wants to borrow from central bank as revenues lower than estimates

By Anh Vu, Thanh Nien News

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An employee places Vietnamese dong banknotes in a money-counting machine for an arranged photograph inside a Ho Chi Minh City Housing Development Commercial Joint-Stock Bank (HDBank) branch in Ho Chi Minh City. Photo: Bloomberg An employee places Vietnamese dong banknotes in a money-counting machine for an arranged photograph inside a Ho Chi Minh City Housing Development Commercial Joint-Stock Bank (HDBank) branch in Ho Chi Minh City. Photo: Bloomberg

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To make up for lower-than-expected government revenues, the Ministry of Finance is planning to take loans of VND30 trillion (US$1.35 billion) from the central bank in addition to measures to boost the revenues.
The media reported the plans even as the ministry is having problems with its effort to name and shame hundreds of tax defaulters into paying a total of VND12.65 trillion (US$573.38 million) in alleged back taxes. Dozens of businesses were found wrongly accused after their names were publicized on July 20.
According to the plans, the ministry will issue bonds worth VND15 trillion ($678.33 million) to the government’s sovereign wealth fund SCIC to refinance its 2013 bonds that mature this year.
It also seeks to ensure state-owned companies fully pay taxes they owe, an estimated VND25-30 trillion ($1.13-1.35 billion).
At least VND95 trillion ($4.29 billion) will be mobilized from the social security fund which faces a risk of running a deficit in a few years.
At a meeting last month Deputy Minister of Finance Vu Thi Mai said the government’s revenues will possibly be VND32 trillion ($1.45 billion) lower than estimates due to a sharp decline in crude oil prices -- from $100 a barrel last year end to around $60 for the past six months.
Latest figures from the General Statistics Office show that total revenues as of July 15 were worth VND476.5 trillion ($21.54 billion), or 52.3 percent of the year's target.
Crude oil sales accounted for 8.1 percent of that.
On the other hand, the government spent VND590.9 trillion ($26.72 billion), more than 69 percent on public expenditure.
It hopes to keep the budget deficit at VND226 trillion ($10.22 billion), or 5 percent of GDP, this year, as being approved by the National Assembly.
Concerns
In an interview Wednesday with Vietnam Television, another deputy finance minister, Huynh Quang Hai, said the VND30-trillion loan the ministry plans to get from the central bank is in accordance with laws and has to be paid back within the financial year.
The ministry did not plan to take the loan, because the state budget was facing bigger-than-expected troubles, Hai said.
However, economists are worried about the fund-raising plans.
Ngo Tri Long said the central bank manages monetary policies with its reserves. Should the finance ministry fail to pay off the loan, the whole economy would be affected, he said.
Many international institutions like the World Bank and International Monetary Fund also warn against the practice of borrowing from national reserves, he pointed out.
Vo Tri Thanh, deputy chief of the Central Institute for Economic Management, was quoted by news website Bizlive as saying he is concerned the finance ministry has not said clearly what it plans to do with the loan amount.
But Nguyen Tri Hieu, a banking analyst, said it is not unusual for a government to borrow from its central bank, but it needs to have detailed plans for repaying and handling public debts.
Vietnam's government especially needs to draft such plans, considering that its debt level is rapidly approaching the target of 65 percent of GDP, Hieu said.

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