In Vietnam, some local governments are drowning in debt after overspending

Thanh Nien News

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 Workers with a public company tasked with clearing streets in the southern province of Ca Mau. Photo credit: Tuoi Tre
Within less than a week, local media have exposed serious financial problems at two local party and government agencies in southern Vietnam, raising once again concerns about the lack of fiscal discipline in a country with a structural, stubborn budget deficit. 
In the southernmost province of Ca Mau, its capital town of the same name has recently sought advanced funding of VND50 billion (US$2.2 million) from the province to pay its employees and finance other activities, Tuoi Tre reported on Friday.
Since 2012, Ca Mau Town's budget deficit has kept increasing. At the end of 2013, it was estimated at more than VND90 billion, according to the report.
The town was also reported to owe a total of VND300 billion to contractors of public construction projects and suppliers of public services such as environment, lighting, and landscaping.
Speaking to Tuoi Tre, Huynh Thanh Dung, vice chairman of Ca Mau People's Committee, said the trouble was partly caused by recent funding cuts by the central government.
The town has been developing huge infrastructure projects with an aim to become a big city, he said.
However, Dung believed the situation will be better this year, as the town's revenues have still exceeded the target.
Ca Mau Town's financial situation came to light just a few days after it was reported that the Party committee at the capital town of Bac Lieu Province has struggled since at least July, after depleting its annual budget of VND7.5 billion. 
The committee also owes over VND3.2 billion to different local agencies, including hospitals where its employees received heath check-ups, according to local media.
No surprise
Commenting on the reports, Bui Duc Thu, member of the Finance-Budget Committee under the National Assembly, told Tuoi Tre that he is not surprised. He said official reports have already mentioned huge debts incurred by several local governments.
Even though local governments are legally obliged to cut spending when their debts exceed 30 percent of their assigned funding, they rarely do so, he said.
Debts at many communes, the smallest governments in Vietnam's administrative system, range between VND1-10 billion, Thu said, noting that for some, the figures are much higher.
Economist Do Thien Anh Tuan blamed the lack of financial discipline for local governments' overspending, a problem that has existed for a long time. 
They do not worry much about their budget, as they believe that any lack of money will be compensated by the state budget, Tuan was quoted as saying.
Thu agreed, urging the central government to tighten control over the budgets of local governments.
A strict financial discipline is especially important now, given that the state budget has been in deficit for years and Vietnam's public debt has been rapidly increasing.
Vietnam's public debt is expected to reach 61.3 percent of gross domestic product this year, according to official figures.
The Ministry of Finance forecast that the country's public debt will hit the limit set at 65 percent of GDP in 2017.

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