PM okays fiscal policy stabilization program

Balancing the budget has been a difficult problem for the last few years, and a sustainable fiscal policy is viewed as an urgent task.

The medium-term debt management program for the 2016-2018 period is a specific orientation in fiscal policy. The program aims at raising loans at appropriate costs and risk levels; meeting the need to balance the state budget and ensure socio-economic development; allocating and using loans for the right purposes; and keeping public debt at safe levels.

The government will gradually reduce domestic and foreign loans to compensate for state budget overspending, which was 5.4 percent of GDP in 2016, and set to reach 3.38 percent in 2017 and 3.3 percent in 2018. The program also clarifies that total government loans to cover state budget overspending would reach no more than VND606.4 trillion, including VND247.2 trillion in 2016, VND172.3 trillion in 2017 and VND186.9 trillion in 2018. Borrowing to repay central government debts is set at VND414.4 trillion, and borrowings from foreign sources for lending at VND118.4 trillion.

Government guarantees for bonds of the Vietnam Development Bank and the Vietnam Bank for Social Policies will also be trimmed to stabilize outstanding loans. Regarding disbursement of government-guaranteed foreign loans, the annual net withdrawal will be limited at US$1 billion.

The government has decided to suspend all issuance of new guarantees for domestic and foreign loans and review the list of priority programs in order to set limits for government guarantees in the 2016-2020 period while ensuring debt safety as approved by the National Assembly.

The limit of foreign commercial loans (net borrowing) by businesses and credit institutions in the form of self-borrowing and self-payment will be up to about US$5.5 billion per year. The country’s short-term outstanding loans will be closely controlled with a maximum growth rate of 8-10 percent per year.