With debts owed by the Vietnamese government having more than doubled over the past five years, an economic expert warns against reckless spending to avoid exacerbating the situation.
The government should check its pocket to see what it has before “spending whatever it needs,” Professor Doctor Nguyen Quang Thai told Tuoi Tre (Youth) newspaper in an interview published Thursday.
Thai, deputy chairman of the Vietnam Economic Association, spoke to Tuoi Tre after the government admitted in a recent report that its debt to GDP ratio exceeded the safe limit last year.
Vietnam caps government debt at 50 percent of GDP, but the ratio had already reached 50.3 percent by the end of last year, according to a report the Ministry of Finance delivered to lawmakers in Hanoi on Monday.
Last year Vietnam’s public debt rose to VND2,700 trillion (US$120.54 billion), more than double the 2011 figure of VND1,300 trillion ($58.04 billion), Thai said, citing government data.
“This means national debt increased at an average annual pace of 20 percent, which is a very worrying problem,” he said.
“Even worse, the debts are much bigger than Vietnam’s repayment capacity.”
In 2015 Vietnam’s public debt was some 61.3 percent of GDP, still below the 65 percent limit, but experts are concerned that it will soon breach the ceiling.
Vietnam’s public spending has been growing so rapidly over the last five to ten years that it has outpaced state earnings and led to big national debts, Thai said.
He added that state revenue is currently below what is needed to cover regular spending and debt repayment.
“Money used to clear debts has already made up more than 25 percent of state earnings. That proportion will reach 30 percent by 2019,” he said.
“It will then be a tough problem for the government to allocate the remaining 70 percent for all spending demands, especially for investment and development expenditure.”
The government will therefore have to continue borrowing loans for its investment and development plans, building up pressure of paying off current debts, he added.
Professor Doctor Nguyen Quang Thai. Photo: Tuoi Tre
Thai suggested that the government’s spending plans be prepared with serious consideration towards how much state revenue will be generated.
“We are preparing spending plans without worrying about budget collection, thinking we only need to take out loans to account for the money shortage, which is an unscientific approach,” he said.
“We should first look at our wallet before deciding how the money should be spent.
“The government should also practice thrift and avoid unnecessary spending on things such as building new offices or luxury cars for public use.”
At Monday’s meeting with the lawmaking National Assembly, the Ministry of Planning and Investment also delivered a report, saying the government needs some VND4 trillion ($178.57 million) for investment and development for the 2016-20 period.
The capital is 2.1 times higher than the VND1.84 trillion ($82.14 million) that the budget can afford, according to Minister of Planning and Investment Bui Quang Vinh.