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Vietnam & World Bank release joint public expenditure review

Released at: 17:10, 03/10/2017

Vietnam & World Bank release joint public expenditure review

Photo: Hai Van

"Vietnam Public Expenditure Review: Fiscal Policies Towards Sustainability, Efficiency, and Equity" released on October 3.

by Hai Van

The Vietnamese Government and the World Bank released a joint report in Hanoi on October 3 entitled “Vietnam Public Expenditure Review (PER): Fiscal Policies Towards Sustainability, Efficiency, and Equity”.

The main purpose of the assessment is to inform fiscal policy decisions and reform the action plans of the government, particularly in meeting growth, poverty reduction, and global integration objectives.

The PER was undertaken by relevant agencies of the government, led by the Ministry of Finance in collaboration with the Ministries of Planning and Investment, Education and Training, Health, Science and Technology, Agriculture and Rural Development, and Transport, and other relevant central government agencies and selected cities and provinces including Lao Cai province, Hai Phong city, Quang Nam province, Ho Chi Minh City, and Can Tho city.

The review benefited from contributions by the World Bank and other international organizations, which contributed to the analysis and recommendations, in particular through sharing international experience and information on global trends and good practices in public financial management.

On the basis of a comprehensive analysis of revenue, expenditure, and borrowing policies in Vietnam during the 2011-2015 period, the PER identifies State budget revenue and expenditure trends over past years, highlights achievements and points to areas for potential improvement, key fiscal challenges, and strategic directions on fiscal consolidation, and fiscal policy and governance reforms, in the short, medium and long terms.

The review was undertaken as Vietnam is experiencing emerging fiscal challenges, including narrower fiscal space, rising public debt, and concerns about the medium-term sustainability of the current fiscal position. State budget revenue mobilization, particularly from taxes and fees, as a percentage of GDP has decreased, while public spending needs continue to grow. In addition, the rapid pace of expansion, openness, and decentralization has made the economy more complex to manage.

“In order to ensure fiscal sustainability, the National Assembly has issued a Resolution requiring the reduction of fiscal imbalances and thereby of the budget deficit to 3.9 per cent of GDP during 2016-2020 and no more than 3.5 per cent in 2020,” said Deputy Minister of Finance Do Hoang Anh Tuan. “Achieving these targets will require concerted efforts to boost revenue mobilization, restructure and enhance efficiency in spending, and strengthen the management of public assets and liabilities, and of fiscal risks, at both central and local levels. We are pleased that this report provides concrete recommendations on policy options in these regards.”

“The PER comes at a critical juncture when Vietnam faces important fiscal choices,” said Mr. Ousmane Dione, Country Director of the World Bank in Vietnam. “We hope that the report provides a useful analytical foundation for the government and relevant stakeholders, including the National Assembly, in further developing medium-term development, fiscal, and budget plans and priorities.”

The report recommends 68 specific policy measures that Vietnam can implement to achieve a gradual fiscal consolidation while ensuring adequate fiscal space for investment and social spending and to improve the efficiency of spending through restructuring budget allocations between central and local governments, capital and recurrent spending, and reallocation within sectors.

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