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Quarter of state budget earmarked for debt repayments
  • | dtinews.vn | April 14, 2016 11:23 AM

Vietnam is forecast to use up a quarter of the state budget for debt repayments in 2016 and this rate may reach a record high between 2022 and 2025, said a local economist.

 

Quarter of the state budget to be used for debt repayments

According to Dr. Luu Bich Ho, former head of the Ministry of Planning and Investment's Development Strategy Institute, in 2015, Vietnam had to spend 16% of the national budget to repay debts.

To date, recurrent expenditures have accounted for up to 80% of budget revenues. Meanwhile, Vietnam has seen a rapid rise in its public debts in recent years, approximately to the local government's payable level of 65%. The payment terms are a problem for Vietnam, because they are almost short, putting a pressure for Vietnam's public debt repayments, particularly in the context of the country's high budget deficit.

Dr. Vu Dinh Anh from the Ministry of Finance's Institute of Vietnam Economics said that in 2018 Vietnam may see a record high public debt. Until now, Vietnam has depended on ODA for repaying debts. However, ODA and preferential loans for Vietnam have decreased as the country has become a middle income country. The World Bank plans to stop providing ODA for Vietnam from July 2017, while the Asian Development Bank will do the same from January 2019.

Regarding tax increases to address the budget deficit, Anh said that taxes on trade were related to international commitments. He, however, noted that management agencies should tighten control over tax collecting to deal with fraud and tax evasion. This is expected to partially mitigate the pressure on the government’s coffers.

At a recent meeting of the 13th National Assembly, deputies said that the government should early work out solutions for the post-ODA period to avoid shocks when the country needs around USD90 billion for economic development between 2016 and 2020. They urged the government to restructure the state budget and balance income and expenditures to reduce the public debts.

According to some local economists, domestic loans are also a solution for Vietnam when ODA end, but the government would then be forced to pay the same interest rates as local businesses.

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