According to the National Assembly (NA) Committee for Economic Affairs, the total monies collected by the state over the past four months was down by nearly 20 percent over the same period last year. Therefore, the total amount for this year will be somewhere between VND 29,000 and 63,000 billion less than previous budget estimates.

While the Vietnamese Government is making every effort to maintain economic growth and ensure social welfare, policy-makers are pondering the question of how to balance its income and its spending.

Less tax collection, more spending

Currently, tax revenues are declining due to reduced exports and limited business and production activities. In addition, major economic stimulus packages valued at billions of US$ to help Vietnam’s economy get out of its economic downturn have put pressure on the state to balance its budget. Therefore, the Vietnamese Government has had to re-adjust the level of budget overspend to around 8 percent.

Economic expert Bui Kien Thanh said, “The re-adjusted level is only a prediction. It is a question of whether the State can ensure it brings in enough revenue. If loss of revenue happens throughout the country, the level of overspending will be far higher.”

A member of the National Monetary Advisory Council, Cao Sy Kiem, stressed the need to help the national economy get over this difficult period by spending more of the State budget.

If businesses and the economy rebound, the sources of revenues will improve. However, increasing the overspending level to 8 percent is still not enough to meet the country’s spending needs, therefore, it is essential to provide more capital to the State budget by issuing Government bonds and creating flexible ways of mobilizing idle capital from the public, said Mr Kiem.

The Government has recently proposed issuing an additional VND 20,000 billion worth of bonds.

Budget deficit throws up different scenarios

Vietnam’s annual budget deficit used to be under five percent in previous years, but it has now exceeded the eight percent level. Such a high rate threatens to double the burden on the economy if the applied economic stimulus packages fail.

Some National Assembly deputies and economists have warned that without careful analysis, it could cost the country dearly.

Nguyen Duc Thanh, a senior researcher from the Economics College of Hanoi National University, said the 8 percent level is acceptable at present but this means a high risk of macro imbalance and inflation, which recently caused the economies in the Americas and others with huge deficits to collapse.

Now, the crucial issue is to hammer out effective mechanisms to manage stimulus packages, which should be compatible with the state budgets capacity.

The Institute for Research on Economics and Policy reports four ‘scenarios’ for the 2009 budget deficit: 7.03 percent if the stimulus package stands at VND17 trillion, 8.99 percent if the package is worth VND50 trillion, 10.15 percent if the package has a capital of VND75 trillion and 11.1 percent if the economic stimulus package hits VND100 trillion. These figures should be taken into account by policymakers.

VietNamNet/VOV