Improving budget discipline, ensuring safety and effectiveness of public debt management

On the morning of November 3, continuing the 10th Session, the National Assembly discussed in groups the draft Law on Public Debt Management (amended).

Discussing in groups, National Assembly deputies expressed high consensus on the need to amend the Law on Public Debt Management to institutionalize the Party's policies, perfect the legal system, and especially promote decentralization and delegation of power along with cutting and simplifying administrative procedures; improve the efficiency of mobilizing and using loans, ensuring public debt safety; and contribute to promoting sustainable growth in the coming period.

Detailed regulations on violations in public debt management, ensuring deterrence

The National Assembly discussed in groups the draft Law on Public Debt Management (amended). (Photo: DUY LINH)

Regarding the re-lending mechanism, National Assembly delegate Hoang Van Cuong ( Hanoi City Delegation) expressed his agreement with the amendment to encourage re-lending instead of allocation. However, the delegate said that it is necessary to remove obstacles for public service units, because currently they have difficulty in securing assets when borrowing capital.

“The draft law stipulates that banks that are assigned to lend are not required to bear risks, which is reasonable. Only then will universities and public hospitals be able to access capital for development,” said the delegate.

Delegates also proposed a flexible mechanism: Public service units that have self-insured regular expenditures can still be partially allocated and re-borrow the remaining amount, to encourage effective use of capital and avoid the mentality of relying on 100% allocation.

In addition, delegates also proposed clearly defining responsibilities in government guarantees for business loans.

“If a business is guaranteed by the Government but later cannot repay the debt, the appraisal agency, for example the Ministry of Finance, must take corresponding responsibility. Only then can we avoid the situation of 'irresponsible guarantees' leading to the risk of bad debt,” the delegate emphasized.

Delegate Ly Thi Lan, Head of the National Assembly Delegation of Tuyen Quang province. (Photo: NA)

Delegate Ly Thi Lan, Head of the National Assembly Delegation of Tuyen Quang Province, pointed out: Article 9 of the 2017 Law on Public Debt Management lacks specificity and does not quantify violations, leading to difficulty in applying it in practice and failing to demonstrate deterrence in practice.

“Reality shows that there are violations in signing, negotiating, guaranteeing, and allocating loans... causing serious consequences, but the handling is often unclear and not investigated thoroughly; political and public responsibility is not clearly demonstrated, and is not linked to the Law on Cadres and Civil Servants and the Party's regulations on controlling power in allocating/guaranteeing/financial incentives...”, the delegate stated.

In order to institutionalize the Central's resolutions and regulations on public finance and public investment management, delegates proposed to amend Article 9 in the direction of detailing legal responsibilities: Agencies, organizations and individuals who violate the provisions of the law on public debt management, depending on the nature, level and consequences, will be handled in one or more forms: Disciplinary action according to the provisions of the law on cadres, civil servants, public employees or Party regulations (if they are Party members); At the same time, the Government is assigned to specify in detail violations in public debt management, the authority to handle, the level of handling and the process of assessing consequences, ensuring consistency with relevant laws on public finance, anti-corruption, thrift practice and anti-waste.

In addition, according to the delegate, it is necessary to complete sub-law documents on the construction of a mechanism for pricing guarantee risks; reporting potential guarantee contingency obligations in national budget or financial documents. It is possible to learn from the "guarantee risk provision" model of some OECD countries, in order to more closely monitor contingent liabilities arising from guarantees; improve the ability to manage fiscal risks; and get closer to international practices on managing potential liabilities.

Clarifying the responsibility of commercial banks for re-lending if risks occur

Speaking at Group 11, National Assembly Chairman Tran Thanh Man agreed with many contents in the draft Law on: Classification of public debt, principles of public debt management, contents of decentralization and delegation of authority to the Prime Minister and the Ministry of Finance in a number of tasks on debt management, enhancing the initiative and responsibility of local authorities in deciding and using the budget.

Regarding the issuance of government guarantees, the draft law amends the conditions for issuing government guarantees in the direction that the Ministry of Finance does not appraise financial plans but only relies on the appraisal results of a number of credit institutions.

National Assembly Chairman Tran Thanh Man speaks at the meeting. (Photo: DUY LINH)

According to the National Assembly Chairman, such a process does not clearly demonstrate the responsibility of the guarantee-issuing agency; however, it is recommended to clarify and create an additional intermediate level to increase administrative procedures, while clearly stating the responsibilities and obligations of credit institutions appraising the financial plan.

Regarding the organization of borrowing and debt repayment by local governments, the Chairman said that decentralization aims to increase local autonomy, help reduce administrative procedures, shorten issuance time, and create conditions for localities to mobilize capital faster for projects. However, the full delegation of authority to the Provincial People's Council to approve the issuance of local government bonds must be done within the total loan amount approved by the National Assembly to ensure public debt safety.

Regarding the method of ODA capital lending, the draft Law supplements regulations in the direction that commercial banks re-lend to public service units in the form of lending agencies not bearing credit risks (Clause 2, Article 35); re-lend to enterprises to invest in programs and projects on the state's priority investment list in the form of re-lending agencies bearing part of the credit risks (Clause 4, Article 35).

The Chairman requested a thorough assessment of the above contents. The Chairman of the National Assembly pointed out that re-lending without taking on credit risks could lead to lax procedures for evaluating borrowers, which could create major risks that are entirely borne by State agencies.

Noting the above issue, the National Assembly Chairman requested clarification on how the responsibility of commercial banks is regulated in the law in case of a risk of not being able to repay a loan?

"We must have this provision so that if we only have to share a part of the risk, what the ratio is, and on what basis it is determined, it must be stipulated in the law. If the provisions in the law are not applicable, then the Government must guide and issue a decree," said the National Assembly Chairman.

The National Assembly Chairman requested the Ministry of Finance - the drafting agency - and the Economic and Financial Committee - the appraisal agency - to continue to work hard to review and amend the law to facilitate better public debt management in the coming time, ensuring public debt is below the allowable limit and contributing to national development.

Thu Hang

Source: https://nhandan.vn/nang-cao-ky-luat-ngan-sach-bao-dam-an-toan-va-hieu-qua-quan-tri-no-cong-post920204.html