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$8bil stimulus package raises budget concerns
The nation’s stimulus package is dampening the impact of the global economic crisis on Viet Nam’s export-driven economy, but its US$8.8 billion price tag is raising concerns over a widening State budget deficit.
The total package is still pending final approval by the National Assembly, but economists were already sounding alarms last week at a conference in Ha Noi entitled "Managing Fiscal and Monetary Policies to Stimulate Investment and Consumer Spending".
A member of National Assembly’s Economic and Budget Committee, Mai Xuan Hung, wanted to know just how big the State’s budget deficit would be if the stimulus package were passed.
Minister of Planning and Investment Vo Hong Phuc said that the Government was reviewing the overall fiscal implications and would submit its report to the National Assembly in the next few weeks.
Phung Quoc Hien, chairman of the National Assembly’s Economic and Budget Committee, said the commission would ask the ministries of Planning and Investment, Finance, as well as the State Bank of Viet Nam, to submit reports on the impact of the stimulus package, including information on where the funds were coming from, who would benefit from the package, whether the package was in compliance with the Law on the State Budget, how much of the package cost would be due to tax cuts, and how much money the State intended to borrow to finance the costs of the stimulus.
Deficit spending
The Government intends to ask the National Assembly to authorise a budget deficit equal to 8 per cent of GDP this year, up from the previous 4.82 per cent.
In the first quarter of 2009, State budget revenues were estimated at VND86.27 trillion ($4.87 billion), equal to 22.1 per cent of official targets and a decrease of about 20 per cent from the same period last year in absolute figures, according to the Ministry of Finance.
The cities of Ha Noi and Hai Phong and the provinces of Vinh Phuc, Can Tho, Ha Giang, Hai Duong and Phu Yen also predicted a decline in State budget collections for the entire year.
Meantime, State spending in the first quarter was estimated to have reached VND100.7 trillion ($5.7 billion), up 4.1 per cent over the same period last year.
Minister of Finance Vu Van Ninh said that pressures on the State budget were increasing rapidly, and the ministry had not yet designated sources of funds to make up for the shortfall.
Besides VND7.7 billion ($435 million) from the Government bond proceeds left over from 2008 and VND36 trillion (over $2 billion) worth of Government bond proceeds expected this year, the National Assembly was expected to consider authorising an additional bond issue of VND20 trillion ($1.13 billion).
While many worried about how to pay for it, Hien said the stimulus package was needed to revive the economy and that now was not the time to hold fast to requirement of a balanced budget as the country faced tottering into a recession.
The stimulus packages now equaled 12 per cent of GDP, and its effects on the economy were already seen as positive, as indicated by a positive growth rate and reawakening financial and real estate markets in the first quarter.
The Government has also lowered interest rates for mid-to long-term loans through 2011 to spur enterprises and individuals to expand business and investment.
Tran Hoang Ngan, a member of National Monetary Policy Advisory Council, predicted that the impact of the stimulus package would be seen in the fourth quarter of this year, while Prime Minister Nguyen Tan Dung has already said the second quarter would see stronger growth than the first.
VietNamNet, Viet Nam News
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