What are the sources of State budget deficit in Vietnam?

What are the sources of State budget deficit in Vietnam? (Internet image) 

1. What is State budget deficit?

The State budget deficit includes deficit of the central government budget and deficit of provincial budgets.

- Central government budget deficit is the positive difference between total central government budget expenditure (not including principal repayment) and total central government budget revenue.

- Provincial budget deficit is total deficit of budget of each central-affiliated city or province, which is the positive difference between total budget expenditure (not including principal repayment) and total budget revenue of every province.

(Clause 1, Article 4 of the Law on State Budget 2015)

2. Sources of State budget deficit in Vietnam

- 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 Official Development Assistance, concessional loans granted by governments of other countries, financial institutions of other countries and international organizations; issuance of Government bonds to international market, not including on-lend loans.

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

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

+ On-lend loans from the Government.

Note Loans to cover budget deficit do not include borrowing amounts to repay principal.

(Clause 2, 3, 4, Article 4 of Decree 163/2016/ND-CP)

3. Conditions for the provincial budget deficit of each province in Vietnam

Provincial budget deficit of each province is permitted only when it meets all the regulations and conditions as follows:

- Only provincial budget deficit because of investment in projects under midterm public investment plans decided by the People’s Council of the province is permitted as prescribed in Point a Clause 5 Article 7 of the Law on State Budget 2015;

- Annual provincial budget deficit shall not exceed the annual budget deficit decided by the National Assembly for such province as prescribed in Point c Clause 5 Article 7 of the Law on State Budget 2015;

- Within 90 days from the end of the budget year preceding the year in which the estimates are made, no overdue outstanding debt arising from the loans payable in the budget year preceding the year in which the estimates are made. In exceptional circumstances, the Ministry of Finance shall request the Government to:

- Take loans to cover local government budget deficit primarily mobilized from midterm and long-term loans. Annually, according to capital market development, the Ministry of Finance shall propose minimum rate of midterm and long-term loans to cover local government budget deficit;

- Loan balance of local government budget, inclusive of loans to cover budget deficit according to the estimate shall not exceed the loan balance prescribed in Clause 6 hereof.

(Clause 5, Article 4 of Decree 163/2016/ND-CP)

4. Loan balance of local government budgets in Vietnam

- 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;

- The revenue higher than or exceeding recurrent expenditure of the local government budgets prescribed in Point b and Point c of this Clause shall be determined according to the revenue and expenditure estimates of the local government budgets decided by the National Assembly of the year in which budget estimates are made, and the revenue of the local government budgets to be retained shall be determined in accordance with Clause 1 and Clause 2 Article 15 of Decree 163/2016/ND-CP, not including residual revenues of local government budget.

(Clause 6, Article 4 of Decree 163/2016/ND-CP)

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