Phuong Thao
The National Financial Supervisory Commission (NFSC) has suggested that the Government should boost public investment via government bond issuance to the major projects currently in financial distress, all for the sake of economic growth. The central bank has also suggested selling VND100 trillion worth of government bonds to expand public investment while the Ministry of Finance has warned that the State budget revenue is about VND65 trillion below the estimate.
NFSC has proposed that it is high time for fiscal easing as the financial and monetary market has seen big improvements, especially in liquidity of the monetary market and of the banking system, asset quality of credit institutions and securities companies. Meanwhile, risk reserve funds of credit institutions have been strengthened.
At first glance, it sounds reasonable to borrow VND65 trillion to make up for the budget shortfall to cover other expenditures. However, few people think that the Government should reduce expenditures.
Economist Nguyen Quang A says in Thoi bao Kinh te Sai Gon that the State has not only lavishly been spending money from the budget, but it has been ineffectively spending. It is hard to cut regular expenditure but it is necessary to re-consider development investment spending.
A chronic budget deficit has triggered debt burden and the total public debt has risen to a dangerous level. In the first five months, the nation spent around VND38 trillion on debt repayment. Vietnam’s bad debt has been far beyond the safety zone, A says.
These solutions have also triggered a wave of objections from many other economic experts as they say that assessments of NFSC are not convincing in the current situation. They see that the solutions may cause risks to the economy while the Government still has other ways to raise funds besides bond issuance. The experts have also warned that if the Government attaches too much importance to economic growth while other issues are ignored, uncertainties will occur and the consequences in following years won’t be easy to fix.
Economic expert Vu Quang Viet is quoted by Dat Viet as saying that the assessments of NFSC did not make sense because the banking system is bearing a high bad debt ratio. Many State-owned enterprises are facing huge debts while public debt is at a high level.
“Vietnam applied demand stimulus policy twice in 2008 and 2010 and the consequences it caused to the economy have yet to be solved. If the policy is applied again as suggested by NFSC, it is possible that high inflation will return,” Viet says.
Expert Dinh Tuan Minh says in Thoi bao Kinh te Sai Gon that policy makers have reason to worry about the possible lower-than-expected gross domestic product (GDP) growth rate this year as credit growth stays low despite falling lending interest rates. To reach this goal, stimulus has been mentioned repeatedly to speed up economic growth.
“I agree at the suggestion on one viewpoint. In a developing country like Vietnam, public investment is an important source to raise development, improving infrastructure for the economy and stimulating private investment. However, I disagree at government bond issuance to compensate for budget deficit at present. This move will pile pressure on private investment as interest rates will increase. This trouble has occurred in the country over the past years and has yet to improve,” Minh says.
Dr. Tran Ngoc Tho shares the same viewpoint, saying that there must be something wrong with the suggestion for government bond issuance to raise budget collection and cover public investment. From the viewpoint of economists and some National Assembly deputies, the real public debt of Vietnam exceeded 100% of GDP a long time ago. Therefore, issuing additional government bonds is pushing the economy to near crisis point.
Tho also points out that it is not difficult to deal with budget shortfall this year. To compensate for subsidy packages such as the VND30-trillion loan program for the real estate sector, the Government can recover interest rates from the vast sum State Capital Investment Corporation is depositing at banks. If the budget shortage situation remains, the Government can collect dividends from State capital in State-owned enterprises.
With just the two sources, the budget shortfall in 2013 can be solved. In coming years, if necessary, the Government should consider selling State-owned firms or allowing the private sector to join large infrastructure projects such as highways and roads. The thought that private enterprises should not participate in infrastructure projects may be just an excuse to protect group interests in the State-run sector, Tho adds.
Viet says in Dat Viet that the lesson of the Philippines should be learned. The nation’s authorities have won confidence from citizens for highlighting the determination to fight corruption and stabilize the economy with low inflation. The nation does not either apply stimulus policy or attach much importance to foreign investment attraction, but its economy has seen positive signs with inflation dropping steadily while both investment and GDP growth rate have advanced.
The Saigon Times Daily
Đăng ký: VietNam News
