Ensuring sustainable sources of wage reform

On the afternoon of October 23, authorized by the Prime Minister, Minister of Finance Ho Duc Phoc reported on a number of main contents on the implementation of the State budget in 2023, the State budget estimate, the Central budget allocation plan in 2024, and the 3-year State financial and budget plan for 2024 - 2026.

According to Finance Minister Ho Duc Phoc, in 3 years (2021 - 2023), the Government borrowed about 1.32 million billion VND (reaching nearly 43% of the plan). Of which, the central budget borrowed nearly 1.28 million billion VND.

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

According to the Government, the mobilization and repayment of public debt and public debt safety indicators, borrowing limits, government guarantees, and local government borrowing ensure the set goals.

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

Specifically, public debt by the end of 2023 will be about 4 million billion VND, equivalent to 39-40% of GDP. This level is 2.7-3.7% lower than GDP in 2021.

Government debt is about VND3.7 trillion, equivalent to 36-37% of GDP, lower than 1.7-2.7% of GDP in 2021. By the end of 2023, domestic debt will account for 73% of outstanding government debt, up from 67% in 2021.

National foreign debt is about 3.8 million billion VND, about 37 - 38% of GDP. Of which, self-borrowed and self-paid debt of enterprises and credit institutions will increase to 70.7% in 2023. Government debt and Government-guaranteed foreign debt will decrease from 38.6% in 2021 to 29.3% in 2023.

The Government's direct debt repayment obligation compared to total budget revenue is about 20-21%, down 0.5-1.5% compared to 2021.

Regarding the 3-year budget plan, Minister Ho Duc Phoc said that the total budget revenue is about 5 million billion VND. The total budget expenditure is about 5.9 million billion VND, of which the total estimated source of development investment expenditure accumulated over 3 years is over 1.7 million billion VND.

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

With this level of revenue and expenditure, the Government said, the average budget deficit for 3 years is 3.4% of GDP, within the scope approved by the National Assembly.

Regarding the ability to allocate resources to implement salary reform, Mr. Phoc said that by the end of 2022, if including the remaining salary reform funding source and the allocation from increased central budget revenue, the budget for salary reform will be about 132,000 billion VND, and the accumulated local budget will be about 430,000 billion VND.

With the expected revenue and expenditure of the 2024 budget, along with the accumulated salary reform source, it is expected to synchronously implement salary reform from July 1, 2024.

The Minister of Finance acknowledged many difficulties in implementing the national financial plan. In particular, the State budget revenue tends to decrease, and the forecast for the remaining years depends on handling existing limitations and economic recovery.

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

Based on the actual revenue and expenditure of the 3-year budget, the Government expects the total budget revenue for the 5-year period (2021-2025) to reach over 8.4 million billion VND, the budget mobilization rate will be 16.4% of GDP; mobilization from taxes and fees will be 13.4% of GDP and achieve the target.

However, there are still targets that do not meet the plan, such as revenue from equitization and divestment at enterprises at a low level, about 25,000 billion VND, only 10% of the target. The average domestic revenue ratio for 5 years is about 83%, lower than the target of 85 - 86%, due to low revenue from equitization and divestment and exemption of many revenue items to support the economy.

Budget expenditure for the five years is about 10.14 million billion VND. "Budget expenditure will be managed closely and effectively; staff will be reduced and public service units will be reviewed, rearranged, and consolidated, and resources will be ensured for salary reform, national defense, security, and social security," said Mr. Phoc.

Examining this content, Chairman of the Finance and Budget Committee Le Quang Manh commented that the economic context is facing many difficulties, the growth rate of state budget revenue is slowing down, while the demand for investment spending to promote economic recovery and development is increasing quite significantly.

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

This year, the Government estimates that the mobilization demand will reach VND604,379 billion (equal to 93.8% of the plan). Of this, about VND589,000 billion will be borrowed to repay the principal debt of the central budget (accounting for 32.35% of the total loan structure). This ratio tends to increase in 2024 (about 42.4%), showing a trend of having to increase borrowing to repay the principal debt, according to the comments of the Finance and Budget Committee.

In addition, new loans negotiated and signed from 2022 have higher interest rates, which is a big challenge, requiring improved efficiency in using loan capital.

In 2024, the Government expects a total loan demand of VND676,057 billion, of which nearly 55.2% will be borrowed to cover the central budget deficit (VND372,900 billion). The loan to repay the principal of the central budget is VND287,034 billion and the loan for re-lending is VND16,123 billion.

The Government's plan is higher than the loan level approved by the National Assembly and the actual loan amount in 2023, which are VND55,000 billion and VND71,670 billion, respectively.

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

The audit agency noted that the absolute number and the ratio of loans to repay principal are on the rise. The Government's direct debt repayment obligation compared to the State budget revenue in 2024 is about 24 - 25%, approaching the ceiling according to the National Assembly's resolution.

Therefore, the Finance and Budget Committee recommends that the Government carefully evaluate and analyze the causes to find solutions to manage the budget balance and ensure public debt safety.

“The Government needs to allocate increased revenue to increase principal repayment, strengthen management to improve the efficiency of loan use; strictly manage the mobilization and use of loans to offset budget deficits and repay principal. Issuing government bonds is linked to the ability to disburse and repay principal of the State budget,” the appraisal agency suggested.

PHAM DUY

Source