Ensuring sustainable sources of wage reform

On the afternoon of October 23, acting on behalf of the Prime Minister, Minister of Finance Ho Duc Phoc reported on several key issues regarding the implementation of the State budget in 2023, the State budget estimates, the plan for allocating the central budget in 2024, and the three-year State financial and budget plan for 2024-2026.

According to Finance Minister Ho Duc Phoc, in the three years from 2021 to 2023, the government borrowed approximately 1.32 trillion VND (reaching nearly 43% of the plan). Of this amount, the central budget borrowed nearly 1.28 trillion VND.

The main source of borrowing is domestic, through the issuance of long-term bonds (averaging 12.6 - 13.92 years) with preferential interest rates.

According to the government, the mobilization and repayment of public debt, public debt safety indicators, borrowing limits, government guarantees, and local government borrowing have met the set targets.

Minister of Finance Ho Duc Phoc. (Photo: Quochoi.vn).

Specifically, public debt at the end of 2023 was approximately 4 trillion VND, equivalent to 39-40% of GDP. This level is lower than the 2.7-3.7% of GDP in 2021.

Government debt is approximately 3.7 million billion VND, equivalent to 36-37% of GDP, lower than 1.7-2.7% of GDP in 2021. By the end of 2023, domestic debt accounted for 73% of outstanding government debt, up from 67% in 2021.

National external debt is approximately 3.8 million billion VND, about 37-38% of GDP. Of this, self-borrowed and self-repaid debt of enterprises and credit institutions increased to 70.7% in 2023. Meanwhile, government debt and government-guaranteed foreign debt decreased from 38.6% in 2021 to 29.3% in 2023.

The government's direct debt service obligations relative to total budget revenue are approximately 20-21%, a decrease of 0.5-1.5% compared to 2021.

Regarding the three-year budget plan, Minister Ho Duc Phoc stated that total budget revenue is approximately 5 trillion VND. Total budget expenditure is approximately 5.9 trillion VND, of which the total cumulative development investment expenditure for the three years is over 1.7 trillion VND.

Delegates attending the session (Photo: Quochoi.vn).

With these revenue and expenditure figures, the government stated that the average budget deficit over the past three years is 3.4% of GDP, within the limits approved by the National Assembly .

Regarding the availability of resources for salary reform, Mr. Phớc stated that by the end of 2022, including the remaining salary reform funds and those allocated from increased central government revenue, the budget for salary reform would be approximately 132,000 billion VND, while the accumulated local budget would be over 430,000 billion VND.

Based on the projected budget revenue and expenditure for 2024, along with accumulated funds from salary reform, the comprehensive salary reform is expected to be implemented from July 1, 2024.

The Minister of Finance acknowledged numerous difficulties in implementing the national financial plan. These included a downward trend in state budget revenue, with forecasts for the remaining years depending on addressing existing limitations and economic recovery.

The proportion of domestic revenue in total budget revenue is likely to fall short of the planned target of 85-86%; revenue from equitization and divestment of state capital in enterprises is very low. At the same time, restructuring budget expenditures faces challenges, with significant pressure to increase spending. The efficiency of state budget utilization remains inadequate…

Based on the budget revenue and expenditure figures for the past three years, the Government projects total budget revenue for the next five years (2021-2025) to reach over 8.4 trillion VND, with a budget revenue mobilization rate of 16.4% of GDP; mobilization from taxes and fees reaching 13.4% of GDP, thus achieving the target.

Nevertheless, some targets were not met, such as revenue from equitization and divestment of state-owned enterprises, which was low at approximately 25,000 billion VND, only 10% of the target. The average domestic revenue share over the past five years was around 83%, lower than the target of 85-86%, due to low revenue from equitization and divestment and the exemption and reduction of many taxes to support the economy.

The budget for the next five years is approximately 10.14 million billion VND. "Budget spending will be managed strictly and efficiently; staffing will be streamlined, and public service units will be reviewed, reorganized, and consolidated, ensuring resources for salary reform, national defense, security, and social welfare," Mr. Phớc stated.

Reviewing this matter, the Chairman of the Finance and Budget Committee, Le Quang Manh, noted that the economic context is facing many difficulties, the rate of increase in state budget revenue has slowed down, while the demand for investment spending to promote economic recovery and development has increased significantly.

Chairman of the Finance and Budget Committee Le Quang Manh. (Photo: Quochoi.vn).

This year, the Government anticipates a fundraising need of approximately VND 604,379 billion (93.8% of the plan). Of this amount, about VND 589,000 billion will be borrowed to repay the principal of the central government budget (accounting for 32.35% of the total borrowing structure). This percentage is trending upwards in 2024 (approximately 42.4%), indicating a need to increase borrowing to repay principal, according to the Finance and Budget Committee.

In addition, new loans negotiated and signed since 2022 have higher interest rates, posing a significant challenge and requiring improved efficiency in the use of borrowed capital.

In 2024, the Government projected a total borrowing need of VND 676,057 billion, of which nearly 55.2% was borrowed to cover the central government budget deficit (VND 372,900 billion). The amount borrowed to repay the principal debt of the central government budget was VND 287,034 billion, and the amount borrowed for on-lending was VND 16,123 billion.

The government's plan is higher than the borrowing level approved by the National Assembly and the actual borrowing amount in 2023, at VND 55,000 billion and VND 71,670 billion respectively.

With this level of borrowing and debt repayment, the National Assembly's Finance and Budget Committee forecasts public debt in 2024 to be around 39-40% of GDP in the case of positive GDP growth. At the same time, government debt is projected at 37-38% of GDP, national foreign debt at 38-39% of GDP; and the government's direct debt repayment obligations relative to budget revenue at 24-25%. These indicators are within the ceiling allowed by the National Assembly.

The auditing agency noted that the absolute amount and the ratio of borrowing to repay principal debt tend to increase. The government's direct debt repayment obligation compared to state budget revenue in 2024 is approximately 24-25%, approaching the ceiling set by the National Assembly resolution.

Therefore, the Finance and Budget Committee recommends that the Government carefully assess and analyze the causes in order to find solutions for managing budget balance and ensuring public debt safety.

"The government needs to allocate increased revenue to increase principal debt repayments, strengthen management to improve the efficiency of loan utilization; strictly manage the mobilization and use of borrowed funds to cover budget deficits and repay principal debt. Government bond issuance should be linked to the state budget's ability to disburse funds and repay principal debt," the reviewing agency commented.

PHAM DUY

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