Vietnam looks for $100 billion miracle to meet public investment needs

By VnExpress   September 30, 2016 | 03:38 pm GMT+7
Vietnam looks for $100 billion miracle to meet public investment needs
A view of the West Lake and its surroundings in Hanoi. Vietnam is going to need around $100 billion through 2020 to boost infrastructure. Photo by Reuters/Kham

Spiraling public debt is cutting funding to basic infrastructure the country needs.

The Vietnamese government is going to need $100 billion in the next four years to provide the roads, bridges and other services the public needs, said Deputy Prime Minister Vuong Dinh Hue.

However, with the budget deficit hitting 6.1 percent of GDP last year, Vietnam will not have the money to fund these projects by itself.

Vietnam’s public debt nearly doubled to VND2,608 trillion ($116 billion) in 2015 from VND1,393 trillion in 2011, according to official statistics.

Last year’s public debt was estimated to stand at 62.2 percent of gross domestic product (GDP), which was relatively close to the ceiling of 65 percent set by the National Assembly, Vietnam's legislature.

Vietnam remains at low risk of debt distress, according to the World Bank and IMF, however, these international institutions have urged Vietnam to tighten its belt in the face of sharp increases in public debt.

Official statistics show that the country ran a budget deficit of $6.9 billion from January through September. And Vietnam has so far this year spent $4.9 billion or 71 percent of the budget deficit to pay back debts.

According to a report, the government is falling behind in funding public investments, creating a massive backlog of urgent infrastructure projects.

Ministerial agencies and local authorities have disbursed some VND83 trillion ($3.7 billion) in the first five months of this year, according to the Ministry of Planning and Investment.

That means that only 33 percent of the total allocated funds of VND250 trillion has been utilized, lower than the 45 percent in the same period last year.

The Vietnamese government is trying to speed up the investment in the final months of this year to avoid missing its economic growth target of 6.7 percent.

The government still has VND10 trillion in its coffers to bolster public investments next year, said Deputy Prime Minister Vuong Dinh Hue, adding that the funds came from selling stakes in state-owned enterprises last year.

It is evident that infrastructure spending is one of the most effective forms of stimulating economic growth. The total budget for infrastructure spending, however, has been steadily dwindling in recent years as more money goes on public debt payments and government expenditure.

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