VietNamNet Bridge – Dinh Tien Dung, Minister of Finance, talks to Thời báo Kinh tế (Việt Nam Economic Times) about Vietnam’s plan to pay back its foreign debts in 2019.
How do you respond to the State Audit of Viet Nam’s report saying that State revenue in 2018 came mainly from the housing, land and crude oil sectors?
We have fulfilled our duty in collecting for the 2018 State budget by surpassing the set target by 7.8 per cent while tax collection in the central sector surpassed the target by 4.2 per cent. These two figures are indications that the structure of our State budget collection has become more sustainable. In 2018, domestic tax collection accounted for 81 percent of State budget collection. From 2011 to 2015, the rate was about 68 per cent. The State budget’s reliance on crude oil and import-export activities has been gradually reduced.
In 2018, contributions to the State budget from the three main economic sectors – State owned enterprises (SOEs), FDI firms and the non-state sector, were much higher than in the previous year. Budget collection from SOEs saw an increase of 4 per cent, while FDI firms contribute 8.8 per cent more and non-state enterprises contributed 15.8 per cent more. Across the three economic sectors, there was an average increase of 10 per cent. Our economic growth rate for the year was about 7.08 per cent while the inflation rate increased by about 3.5 per cent.
However, I have to admit we have failed to achieve the State budget collection target set by the National Assembly for 2018 because the goal was too high. In 2018, Vietnam was hit by a series of natural calamities while bad debts were settled more slowly than was expected.
However, we did accomplish the budget collection tasks assigned to us by the National Assembly in the three main economic sectors of crude oil, housing and real estate. The total budget we collected from these three sectors was almost 10 per cent higher than in 2017.
In 2018, capital disbursement was much lower than the set target. Has the Ministry of Finance adopted a plan to improve the situation in 2019?
Capital disbursement in the field of capital construction was the lowest in the Government’s 2018 financial plan. Of course, various factors contributed to this problem, including financial regulations in the Law of Public Investment, the Law on Constructions, the Law on Tenders and the Land Law.
To solve these problems, the Government has ordered concerned ministries to review the laws and make adjustments.
For projects using Official Development Assistance (ODA), the government has ordered all project owners to speed up the disbursement of funds in line with their project proposals.
2019 is a pivotal year for the country to accomplish its five-year (2016-2020) socio-economic targets. Will you tell us a bit more about the tasks set for this year?
In 2019, we are nearing the end of the stabilisation period for the national State budget (2016-2020). Therefore, each ministry, sector and locality has to work hard to accomplish or even surpass their assigned budget collection goals.
Meanwhile, the Government has to continue to restructure its State budget planning for each sector and branch to ensure there is ample money –as much as 27 to 27.5 per cent of the budget – to invest in development this year. Meanwhile, the regular spending ratio should be cut down to 63 to 63.5 per cent of total spending. State budget overspending should be capped at 3.6 per cent of the GDP.
In the course of restructuring the State budget, the Government will focus on restructuring public debt in terms of duration, interest rates, domestic and overseas loans and other areas.
In its budget proposal for 2019, the Government requested the National Assembly allocate VND124.800 trillion (US$5.37 billion) to pay for the interest on funds the Government has borrowed from various international financial institutions. The SAV has expressed concerns about the payment of the principle loan of about VND197 trillion. According to the SAV, such large sum may become a big pressure on the State budget.
Since the 2015 when the State Budget Law came into effect, payment for the principle debt has not been included in the balance sheet of the State financial report. However, the settlement of due debts, including domestic and foreign debts, is underway and the payments have not increased the Government’s debt.
In the coming years, the amount of money allocated to pay the country’s principal debts will continue to increase. However, to implement the resolutions of the Party Poliburo and the National Assembly, overspending will be capped at 3.6 per cent of GDP in 2019 and 3.4 per cent in 2020.
Debt payments in January 2019 totalled about VND42.738 trillion ($1.85 billion), of which the domestic debt was VND39.564 trillion ($1.7 billion). Foreign debt was VND3.084 trillion ($133.4 million). Payments on the principle foreign debt in 2019 will total about VND197 trillion ($8.5 billion).