Rules for state budget balancing and management in Vietnam

Rules for state budget balancing and management in Vietnam (Internet image)

Regarding this issue, LawNet would like to answer as follows:

1. Rules for state budget balancing in Vietnam

Principles for balancing the state budget according to Article 7 of the Law on State Budget 2015 are as follows:

- Revenues from taxes, fees, charges, and other revenues must be transferred to state budget balance without association with any particular obligatory expenditure. If revenue must be associated with a particular obligatory expenditure, such expenditure shall be covered by the corresponding revenue in the budget estimate.

The establishment of policies on collection of budget revenues must ensure midterm and long-term balance of budget as well as adherence to international integration agreements.

- State budget is considered balanced if total revenue from taxes, fees, and charges is higher than total recurrent expenditure and the saving for development investment is increasing; If budget deficit still exist, the amount of deficit must be smaller than the expenditure on development investment in order to aim for balanced budget.

The government shall propose special cases to the National Assembly for consideration. Budget surplus, if any, shall be sued to repay principal and interest of loans taken by the state.

- Loans for covering the State budget deficit may only be used for development investment, not recurrent expenditures.

- Central government budget deficit shall be covered by the following sources:

+ Domestic loans from issuance of Government bonds and other domestic loans prescribed by law;

+ Foreign loans granted by governments of other countries, international organizations, issuance of Government bonds to international market, not including on-lend loans.

- Local government budget deficit:

+ Deficit of provincial budgets is permitted; only local government budget deficit because of investment in projects under midterm public investment plans decided by the People’s Council of the province is permitted;

+ Local government budget deficit shall be covered by domestic loans from issuance of Government bonds, on-lending loans from the government, and other domestic loans prescribed by law;

+ Local government budget deficit shall be aggregated with the State budget deficit and decided by the National Assembly. The government shall set out conditions for local government budget deficit in order to ensure solvency of local governments and suit the total state budget deficit.

- Loan balance of local government budgets

+ Loan balance of budgets of Hanoi and Ho Chi Minh City must not exceed 60% of the local government budget revenue they may retain;

+ In the administrative divisions permitted to retain an amount of revenue higher than recurrent expenditure of the local government budgets, loan balance must not exceed 30% of the amount retained;

+ In the administrative divisions permitted to retain an amount of revenue not exceeding recurrent expenditure of the local government budgets, loan balance must not exceed 20% of the amount retained.

2. Rules for state budget management in Vietnam

Principles of state budget management according to Article 8 of the Law on State Budget 2015 are as follows:

- State budget shall be managed in a uniform, democratic, efficient, prudent, transparent, and fair manner with decentralization of management, associated with entitlements and responsibilities of regulatory agencies at various levels.

- All budget expenditures and revenues must be estimated and aggregated with state budget.

- Budget revenues must comply with regulations of law on taxes and tax collection.

- Budget expenditures may only be realized after the budget estimate is approved by a competent authority; the standard, and expenditure limits imposed by competent authorities must be complied with.

State budgets at various levels, budget estimate units, budget-using units must not execute obligatory expenditures before having financial sources and budget estimate, which will lead to debts on fundamental construction and funding for recurrent expenditures.

- Priority shall be given to expenditures on implementation of policies of Communist Party and the State to serve economic development, poverty reduction; ethnic policies; gender equality objectives; development of agriculture and rural areas, education, healthcare, science and technology, and other important policies.

- State budget shall be allocated to fulfill socio-economic development tasks; assurance of national defense and security, international relation, and cover operating cost of the state apparatus.

- State budget shall cover operating costs of political organizations and socio-political organizations.

- Socio-political-professional organizations, social organizations, socio-professional organizations shall cover their own operating costs. State budget only support performance of tasks given by the State as prescribed by the government.

- Payment of due loan interest being obligatory expenditures of state budget.

- The decision on investment and expenditures on investment in programs/projects funded by state budget must conform to the Law on Public investment and relevant regulations of law.

- State budget does not cover operating costs of off-budget financial funds. An organization only has its charter capital supported by state budget within the capacity of state budget and only when the conditions are satisfied: the organization is established and operating in accordance with law, financially independent, and sources of revenue and obligatory expenditures do not coincide with those of state budget.

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