If public capital spending was not monitored closely, there would be a high risk of inflation, he said.

Many lawmakers said it was necessary to tackle the growing deficit, which the National Assembly Finance and Budget Committee has forecast to stand at 6.9 percent of GDP this year, up from 4.1 percent in 2008. They wanted the government to cut the deficit to 6 percent next year.

But Finance Minister Vu Van Ninh said the government was aiming to keep the budget deficit at 6.5 percent of GDP in 2010 because revenue sources were not expected to grow next year.

Many tariff lines would be cut next year, reducing government revenue by around VND3 trillion, Ninh said.

As a result, if the budget deficit next year had to be cut to 6 percent, the government would need to ask localities to contribute more, or investment, social welfare and salaries would need to be reduced, he said.

“The important thing is government debt is still in the safe zone,” Ninh said, noting that many other countries also have budget deficits as they want to spend money for economic development.

Vietnam’s government debt is forecast to stand at 40 percent of its gross domestic product this year, up from 36.5 percent in 2007, the National Assembly Finance and Budget Committee said earlier this month. The debt may continue to surge to 44 percent of GDP next year.

However, Lich said Vietnam’s authorities were not excellent forecasters, implying that government revenue sources may not fall next year as expected by the government.

The government set the 2009 budget deficit target at 7 percent of GDP after there were forecasts that government revenue would fall by as much as VND60 trillion this year, Lich said.

But revenue has been on the rise so far this year, he said, asking why the full-year budget deficit was still expected to reach only 6.9 percent of GDP despite sharp revenue hikes.

Lich said although the government had not successfully raised funds through bond sales but “there was still enough money for investment.”

“So why did the government have to hold bond auctions in the first place?” he asked.

Vietnam’s government reportedly aimed to raise up to US$1 billion from bond issuances on the domestic market in 2009, Standard & Poor’s said in a report last month. “However, the weak demand for its offerings in late August suggests that this target is unlikely to be met. The low interest rate that the government was willing to pay did little to attract investor interest.”

Standard & Poor’s forecast government budget deficit to rise to 6.7 percent of GDP this year. “This reflects both an expectation of weaker economic performance in the year as well as countercyclical measures the government is undertaking,” said the US-based provider of independent investment research.

The forecast compares with an estimate of 10.3 percent of GDP by the Asian Development Bank last month.

Vietnam’s GDP growth this year is projected to hit a decade-low of 5.2 percent, in line with a target of around 5 percent set by legislators, Prime Minister Nguyen Tan Dung said on Tuesday.

Source: Thanh Nien, Agencies