Rules for state budget balancing in Vietnam

Rules for state budget balancing in Vietnam (Image from the Internet)

1. Rules for state budget balancing in Vietnam

The rules for state budget balancing in Vietnam according to Article 7 of the Law on State Budget 2015 are as follows:

- Revenue from taxes, fees, charges, and other revenues as prescribed by law must be fully consolidated into the state budget balance, under the principle of not being linked to specific expenditure tasks. In cases where there are revenues that need to be linked to specific expenditure tasks as prescribed by law, corresponding allocations from these revenues will be arranged in the budget expenditure estimates to be executed. The introduction of tax policies must ensure the principle of budget balance in the medium term, long term, and adhere to international integration commitments.

- The state budget is balanced according to the principle that total revenue from taxes, fees, and charges must be greater than total recurrent expenditures and contribute to an increasingly higher accumulation for development investment; in case of budget deficit, the deficit must be smaller than the development investment expenditure, progressing towards a balance of budget revenue and expenditure; in special cases, the Government of Vietnam submits it to the National Assembly for consideration and decision. In case of a budget surplus, it is used to repay the principal and interest of the state budget loans.

- Borrowings to cover the state budget deficit can only be used for development investment, not for recurrent expenditures.

- The central budget deficit is covered by the following sources:

+ Domestic borrowings through the issuance of government bonds, bonds for national construction, and other domestic borrowings as prescribed by law;

+ Foreign borrowings from loans of the Government of Vietnam from other countries, international organizations, and issuance of government bonds in the international market, excluding loans for re-lending.

- Local budget deficit:

+ Provincial-level local budgets may have a deficit; the local budget deficit can only be used to invest in projects under the medium-term public investment plan decided by the provincial People’s Council;

+ The local budget deficit is covered by domestic borrowings through the issuance of local government bonds, re-borrowings from the Government of Vietnam's re-lent borrowings, and other domestic borrowings as prescribed by law;

+ The local budget deficit is consolidated into the state budget deficit and decided by the National Assembly. The Government of Vietnam provides specific conditions for allowing local budget deficits to ensure they fit the local repayment capacity and the overall state budget deficit ceiling.

- Debt levels of the local budget:

+ For Hanoi and Ho Chi Minh City, it must not exceed 60% of the local budget revenues they are entitled to according to the decentralization;

+ For localities with local budget revenues greater than recurrent expenditures, it must not exceed 30% of the revenues they are entitled to according to the decentralization;

+ For localities with local budget revenues less than or equal to recurrent expenditures, it must not exceed 20% of the revenues they are entitled to according to the decentralization.

2. Rules for state budget management in Vietnam

The rules for state budget management in Vietnam according to Article 8 of the Law on State Budget 2015 are as follows:

- The state budget is managed in a unified, centralized democratic, efficient, economical, public, transparent, and fair manner; with a division and delegation of management; linking authority with responsibility at different levels of state management.

- All revenues and expenditures of the budget must be estimated and fully consolidated into the state budget.

- Budget revenues are implemented according to the provisions of tax laws and revenue policies as prescribed by law.

- Budget expenditures are only undertaken when there are estimates approved by authorized bodies, ensuring they adhere to policies, standards, and spending limits set by competent state agencies. Budget levels, budget estimating units, or budget-using units must not undertake expenditure tasks without financial sources or budget expenditure estimates, which would result in basic construction workload debts or debts for recurrent expenditure tasks.

- Ensure priority allocation of the budget to implement the guidelines and policies of the Communist Party and the State for each period on economic development; poverty alleviation; ethnic policies; achievement of gender equality goals; development of agriculture, rural areas, education, training, healthcare, science, technology, and other important policies.

- Allocate the budget to perform tasks for economic and social development; ensure national defense, security, foreign affairs, and operational costs of the state apparatus.

- The state budget ensures the balance of operational funds for political organizations and socio-political organizations.

- The operational funds for socio-political-professional organizations, social organizations, and socio-professional organizations are implemented according to the principle of self-assurance; the state budget only supports tasks assigned by the Government of Vietnam as prescribed.

- Ensure the payment of due interest debts within the budget expenditure tasks.

- Decisions on investment and expenditure in programs and projects using state budget funds must comply with the 2019 Public Investment Law and related legal provisions.

- The state budget does not support operational funds for extra-budgetary state financial funds. If supported with charter capital according to the law, it must conform to the state budget’s capacity and only be implemented when the following conditions are met: established and operating according to the provisions of law; financially independent; with revenue sources and expenditure tasks not overlapping those of the state budget.

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