Answers promised to increase revenues and cut costs

The government last week reported that in 2024, the total state budget is set to be $71.8 billion, around half for the central budget and the other half for localities. This is lower than last year’s realised number of $72.5 billion.

In addition, an additional $803.3 million from localities that failed to be disbursed for salary reform in the public sector in 2023 will be shifted to this year for the same purpose.

Meanwhile, total central budget expenditure for this year will be around $51.7 billion, of which nearly $18 billion is to be used as a supplement for localities.

The government told the National Assembly (NA) that the state budget estimates for 2024 had been calculated based on assumptions that economic growth will be 6-6.5 per cent, and inflation will be 4-4.5 per cent. The government’s policies on tax reduction and exemption in 2024 are expected to be the same and implemented as in 2023.

Last year, the total value of all policies used for supporting the public and enterprises amounted to about $8.37 billion, including $6.96 billion worth of tax-related assistance.

For example, the government reported that the VAT reduction from July to October helped provide a financial support worth $658.2 million for businesses and the public, contributing to decreasing the price of services and goods, helping to boost production and enhancing employment.

In November, the NA decided to maintain the 8 per cent VAT rate until June at least for various goods and services. It is estimated that this continued VAT reduction will cause a fall in the state budget revenue of $176 million a month.

However, according to the Ministry of Finance, if the reduction in environmental protection tax for fuel and the VAT rate for 2024 is taken into account, it is estimated that the total state budget revenue will sit at $74.17 billion. In 2023, total state budget revenue and expenditure reached $72.48 billion and $73 billion, respectively, leaving a deficit of $520 million.

“New solutions will be used to increase revenue and save expenses, and also to closely control the budget deficit, public debt, government debt, the nation’s foreign debt, and the government’s direct debt repayment within the NA’s permissible limits,” Prime Minister Pham Minh Chinh said. “We will also ask the NA to allow us to continue implementing policies on exempting and reducing taxes and fees, while promptly enacting effective policies related to the global minimum tax.”

Resolution No.01/NQ-CP on key tasks to implement the country’s socioeconomic development plan and state budget estimates for 2024, from last week, stated that the government would thoroughly save expenditure, especially recurrent spending.

The beginning of 2024 will see the reduction and saving of 5 per cent of recurrent expenditure estimates. The government will strictly control overspending, public debt, government debt, and national foreign debt within the permissible limits, the resolution added.

In 2023, total public debt was equivalent to 39-40 per cent of GDP, while the government debt was tantamount to 36-37 per cent of GDP. The nation’s foreign debt hit 37-38 per cent of GDP, and the government’s direct debt repayment was 20-21 per cent of the total state budget revenue.

Late last year, the government submitted a plan for borrowing and paying public debt for 2024 to the National Assembly Standing Committee. Under the plan, the government’s total loans for 2024 will be $28.52 billion, including $15.73 billion for borrowing to offset the central budget deficit, $12.1 billion for borrowing to pay the principal debt of the state budget, and $680.3 million for lending.

The state budget has recorded a deficit for the first time so far this year, largely caused by a rise in public investment disbursement, with a lower-than-expected state budget revenue due to difficulties across the economy.

Despite a state coffer surplus for most of the year, Vietnam is expected to see a deficit in the budget for the whole of 2023, with some fiscal initiatives on assisting businesses applied.