In a talk with Saigon Investment, Dr. VU DINH ANH, an economist at the Ministry of Finance, expressed his many views on this topic.
JOURNALIST: - Sir, according to the Ministry of Finance, the Central Reserve Budget has already been exhausted. How will this affect the current Covid-19 pandemic prevention and control measures, when so many unexpected expenditures keep occurring?
Dr. Vu Dinh Anh: - The budget expenditure for the prevention of the Covid-19 pandemic is not included in any of the budget expenditure estimates, so it can only be taken out of contingency expenditure. However, in the provisioning budget of 2021, there is a special feature that is lower than that of 2020, which is VND 34,500 bn, while in 2020 it was VND 37,000 bn. This shows that our budget estimates and forecast for the economic outlook and Covid-19 control situation for 2021 is nowhere close to reality. In 2020, when building a contingency budget estimate for 2021, the Covid-19 pandemic wave had not yet broken out as strongly as it has this year.
In structuring the contingency budget for 2021, there are two items that were taken into consideration, namely, the Central Reserve Budget of VND 17,500 bn and the Local Reserve Budget of VND 17,000 bn. In a recent statement by the Minister of Finance, he only mentioned the provision for the central budget, which is VND 17,500 bn that has been spent. Currently, the Ministry of Finance has not yet mentioned the expenditure of the Local Reserve Budget of VND 17,000 bn. Whether this money has been spent or how it is was spent, has not been mentioned.
The situation of the Covid-19 pandemic in 2020 was somewhat optimistic, but there is no forecast for 2021 and the situation is becoming more complicated and stressful. Hence, there is no set budget to allocate funds for pandemic prevention and control costs. On the other hand, the reserve budget mainly depends on the Central Reserve Budget, so by August 2021, the entire Reserve Budget may have been spent completely, with expenses continuing to reoccur endlessly.
The expenses according to the budget estimate increased due to the Covid-19 pandemic, while the budget revenue has no guarantees. According to a report by the Ministry of Finance, revenues have been reduced to half compared to the same period last year. This affects the source of payment for expenses, both for recurrent and investment expenditure. The problem now is which source will be used to cover as the revenue is not sufficient enough.
- Sir, what is your opinion for solutions to be taken in handling the current budget imbalance? While what estimation is there for the contingency budget in 2021 that can also be applicable in coming years?
- In order to deal with the current temporary imbalance in the State Budget, it is necessary to differentiate between two issues, namely, the budget deficit for Covid-19 pandemic prevention and control, and the budget balance in general. For the budget to fight against the Covid-19 pandemic, I think there is still a question mark about the local contingency budget, which is how this budget has been handled so far. It is time we calculate the local reserve budget of VND 17,000 bn, as this is larger than the regular savings of only VND 14,600 bn, and it can make up for shortfall in recurrent spending on anti-pandemic measures at this time.
As for how we deal with the current temporary imbalance of the State Budget when revenue is being reduced, it is necessary to take into account a very clear cut solution. If it is determined that the budget imbalance is only temporary, it is necessary to use tools to deal with the temporary budget imbalance. However, if we are not forced to re-evaluate the State Budget imbalance, including the deficit rate, then we need to borrow tools to make up for it. It is possible to increase public debt, but it cannot be transferred from the budget for use in public investment.
We clearly have to take forward all the lessons learnt in 2021 budget dilemmas to practice and implement in 2022 and beyond. For the first time in many years, the report on the implementation of the 2020 budget shows we have not met the budget estimate, while spending exceeded the estimate. The story of the 2020 budget revenue and expenditure problem is set in the context of the Covid-19 pandemic, which was still milder than in 2021. This shows that the impact of this year's Covid-19 pandemic will be much more than that of 2020. How to build estimates and operate the budget to suit the situation and remain close to reality for 2022 is a problem now, because from 2020 to now, three quarters have ended in stress.
- Sir, how do you assess and forecast when this pressure on the provisioning budget may accumulate to next year?
- Firstly, it is the pressure on revenue and expenditure balance. When comparing the revenue base and the ability to collect from economic activities, there are currently two basic contradictions. First, in 2020, although the impact of the Covid-19 pandemic was milder than that in 2021, the overall GDP growth for the whole of 2020 was only 2.93%. Second, while this year, up to now, all economic forecasts have predicted that GDP growth for the whole year will reach 3.5% to 4%, there are even other optimistic forecasts that GDP in 2021 can reach 4.8%. This is a huge contradiction that needs to be clearly explained because there is no reason why this year the Covid-19 pandemic will have a worse impact on the economy than in 2020, but it can lead to higher economic growth. This is very important because this will be the basis for evaluating and developing budget targets.
Secondly, the pressure will be on ensuring budget revenue. In 2020, the Covid-19 pandemic broke out and affected the economy, but it was still milder than this year, but the budget revenue in 2020 did not reach the estimate. So in 2021, the Covid-19 pandemic being complicated and large-scale, and having a bigger impact on all aspects of the economy, the budget revenue here will be how much revenue can be obtained, and not about achieving the estimate.
- Thank you very much.
