Will future generations count cost of borrowing?
by Ngoc Bich
Minister and Chair of the Government Office, Vu Duc Dam, has revealed that the Government will seek National Assembly approval to lift next year's budget overspending from 4.8 to 5.3 per cent of GDP.
Dam, speaking at a cabinet meeting, said the move was necessary to satisfy the country's huge demand for investment and development in the face of a shrinking State budget.
He said if the increase was approved, the Government would have an additional VND20 trillion (US$952.4 million) to spend.
Dam said localities across the nation were calling out for investment capital for electricity, traffic infrastructure, schools, hospitals, and water treatment.
He added that State agencies found it difficult to attract the private sector to join in public projects.
Dam said the Government had thought carefully before making the proposal, promising that the money would be spent in the most reasonable way - and that the rate would be gradually reduced from 2015.
However, there are still public doubts about the Government's position.
According to a Government report issued this week, by the end of this year, the overspending rate will be about 5.3 per cent, 0.5 per cent higher than the set target.
How can the Government ensure the rate will not exceed the target once again if State funds are ineffectively used or used for the wrong purposes?
Recently, people were shocked by the news that Electricity of Viet Nam, a State-owned group which continually complains about its losses, was found to have extracted VND595 billion ($28.3 million) from capital invested in six power generation projects. What for? To build villas, high-rise apartment buildings, swimming pools and tennis courts for its employees!
Investigators have also come to the conclusion that Duong Chi Dung, former director of the Viet Nam Maritime Administration, pocketed tens of millions of dollars in a deal to buy a floating dock that proved to be unusable. More to the point, Dung's violations took place while the State-owned logistics company was making huge losses!
The additional VND20 trillion being sought by the Government is a huge amount of money, but the efforts of a few people like Dung could destroy the Government's hopes.
Experts argue that without strict controls, the extra money pumped into the economy could cause the consumer price index (CPI) to soar, negating the Government's own efforts to curb inflation.
Previously, when the Government launched a $1 billion bailout in 2009 to help stimulate the economy, the overspending soared to 6.9 percent of GDP, far exceeding the estimates. This resulted in high inflation and many other problems.
They also warn that if the State budget falls short of the set target and if spending increases rapidly [from 65.4 per cent of total spending in 2005 to 77.1 per cent in 2012], the Government will have to use loans from foreign countries or issue bonds. This places the debt burden firmly on the shoulders of the next generation.
The budget deficit is so serious that recently the General Department of Taxation had to offer a prize worth VND100 million ($4,700) to its staff if they could collect 10 per cent more tax than planned figures in the last three months of the year. This sort of thing has never happened before!
I guess in the ongoing session of the NA, it is likely that the proposal will be approved as a short-run solution. Of course, it will be acceptable to the public if the Government promises to use the funds in the right way. However, words are often nothing but wind! Action must be taken and promises kept!
In my opinion, the ailing economy cannot be rescued by such a short-term remedy, because, if the medicine is denied, the economy could slip back into decline again.
The two long-term and drastic measures needed are a marked increase in State budget collection together with slashing spending on building grand headquarters, buying vehicles for government offices, and travelling abroad.
This would give psychological impetus to improve the management of investment projects to avoid waste and corruption. — VNS