Vietnamese gov't to squeeze more cash out of major cities

By Anh Minh   November 15, 2016 | 02:17 pm GMT+7
Vietnamese gov't to squeeze more cash out of major cities
Ho Chi Minh City has protested the budget cuts, citing its strained infrastructure and large population. Photo by VnExpress/Minh Tri

Ho Chi Minh City, Hanoi and Da Nang will all have to chip in more to the state coffers.

Despite opposition, Vietnam’s top legislative body has decided that major cities have to share more of their revenues with the central government starting next year.

Ho Chi Minh City, the country’s largest economic hub, will have to contribute 82 percent of its income to the state budget in 2017, compared to the current 77 percent, the National Assembly decided on Monday.

Hanoi will also have to share 68 percent of its revenue instead of 58 percent; and Da Nang 32 percent compared to the current 15 percent.

Last month, HCMC leaders bristled at the government’s proposal to cut the rate of income the city is allowed to retain from the current 23 percent to 17 percent.

Officials said that they’re already grappling to address major infrastructure problems like traffic and flooding and cannot afford to lose further revenue.

The country’s largest city, with around 12 million people, is among 20 percent of the cities and provinces in Vietnam that can cover their own expenditure and contribute to the national coffers. The city took in nearly $12 billion last year as the country’s largest moneymaker.

Nguyen Thi Quyet Tam, Ho Chi Minh City’s legislature chairwoman, said they’ve already cut spending to the bone and would struggle with less money.

Tam described the proposed cuts as too abrupt for the city to handle.

City officials have suggested more gradual cuts so it can keep 21 percent of its income next year.

Vietnam’s government has flaunted its borrowing limits in recent years.

Figures released in June showed a state budget deficit of more than VND260.14 trillion ($11.5 billion) in 2014 -- a figure equivalent to 6.61 percent of the country’s gross domestic product that year. In 2013, the country’s legislators set a 5.3 percent cap on debt, but the deficit amounted to roughly VND236.76 trillion, or 6.6 percent of GDP.

The country’s accumulated public debt is forecast to rise to 63.8 percent of GDP at the end of this year, and then 64.7 percent in 2018, according to World Bank projections.

The country’s legislature has capped accumulated debt at 65 percent.

Related news:

>HCMC warns proposed budget cuts could have 'dire consequences'

>Vietnam raises debt ceiling

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