Vietnam must reduce public spending: Minister

There will be consistent policies to combat inflation this year, including cuts in public expenditure, Minister of Planning and Investment Vo Hong Phuc tells Tuoi Tre in an exclusive interview.

He attributed the current rise in prices to the rise in international prices, pointing out that oil, food, and industrial feedstock have become more expensive.

However, the export prices of Vietnam’s main items like rice, coffee, rubber, cashew nut, and seafood have also risen.

Asked if the country’s high Incremental Capital-Output Ratio signifies investment inefficiency, he said it depends on where the money has been invested.

Investment by state-owned enterprises should be carefully reviewed given recent issues, he admitted.

Investments by the state sector have primarily been in infrastructure due to its deterioration and overloading, but the oversight of such investment has not been effective, he also admitted.

A public-private partnership would result in much more efficiency in infrastructure development, he said.

He agreed that to curb inflation the government should have a consistent financial policy and estimate reasonable public spending right at the beginning of the year.

Vietnam will try, as prescribed in its 2011 plan recently approved by the National Assembly, to cut its state overspending to 5.3 percent of GDP this year and even lower in future, he said, adding the government will only issue VND45 trillion (US$2.3 billion) worth of bonds this year, a huge reduction from the initially proposed VND63 trillion.

The Ministry of Planning and Investment will monitor projects, plans, and capital distribution at the local level, he assured.

The government formulated consistent policies last year but implementation was an issue, he confessed.

He promised specific action that will be taken in accordance with the National Assembly’s Resolution 02 on control over money supply, a law introduced to regulate prices and related issues, closer oversight of projects using public funds, and other issues.

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