How has the economic downturn affect the State budget deficit?

The year 2010 is the last in the current five-year socio-economic development plan. Gross domestic product (GDP) is expected to grow this year by 6.7 per cent, higher than the set target. Exports are expected to triple earlier targets and the trade deficit to remain at 20 per cent or less of total exports. Inflation is under control.

The State budget is likely to grow by 12.7 per cent, as forecast. The increase will be used to fund capital construction projects. As these are completed, there will be grounds for a gradual reduction of the State budget deficit in the coming years.

National debt no higher than 50 per cent of GDP was regarded as a safe margin over the past decade. But the national debt is projected to reach 52.6 per cent of GDP this year and 57.1 per cent next year. Is this a sign that we need to begin addressing the budget deficit?

The committee predicts that the Vietnamese economy will return to stability in 2011, so there will be no further need for special measures against the recession, as we have seen over the past two years.

Together with sound measures to restructure expenditures to limit State spending while increasing budget inputs next year, the committee has recommended the Government keep the deficit at a reasonable level, gradually decreasing it to less than 5 per cent of GDP.

Although the current public debt is at safe level, it remains pretty high. That's why the Government should propose the public debt management measures in accordance with the Law on Public Debt Management. The committee has recommended that the national debt should never exceed 60 per cent of GDP.

Many economists continue to be concerned by the growing national debt. Are their worries justified?

Public debt is a problem for many countries, developed and developing alike. There is no simple formula for setting an appropriate level of foreign and public debt. A safe level of national debt depends on each country's economic development and financial capacity, particularly the capacity to service loans.

In my opinion, Viet Nam's national debt remains at a safe level in light of positive economic growth and budget revenue forecasts for 2011. It is also because Viet Nam's public debt is made up mostly of preferential and long-term loans.

However, the high levels of current outstanding debt and State budget expenditures are reasons that we should adjust the structure of capital resources to ensure punctual debt payment and a lessened dependence on loans. More importantly, we should improve the efficiency of public exenditures to ensure debt remains at safe levels. Therefore, the committee has proposed the Government report to the National Assembly pursuant to the Law on Public Debt Management.

What is your primary focus in the current National Assembly session?

It's possible that potential risks will continue to have negative impacts on economic stability. The risks include the quality of growth, investment efficiency, low competitiveness, the trade deficit, the balance of payments, and upheavals in interest and exchange rates, as well as the budget deficit. These are matters of concern for National Assembly members, so discussions during this session will emphasise finding the best solutions for sustainable national development.

Source: VNS