The Ministry of Finance forecast a budget overspending at 5-5.1% of gross domestic product (GDP) this year, about 1.5-1.6 percentage points higher than the Government’s plan due to the impacts of the COVID-19 pandemic.

Illustrative image (Photo: VNA)

The State budget was under the pressure of increased spending on anti-pandemic effort and assistance to those who were suffering due to the pandemic.

Statistics showed that a sum of VND9.5 trillion (US$400 million) from both central and local budgets was spent on purchasing medical equipment and supplies to prevent and fight the pandemic. This expense could continue to increase.

Some VND6.7 trillion was spent on providing allowances to forces participating in the fight against COVID-19, for meals for people who were kept isolated and undergoing medical treatment during the isolation period.

The State budget also spent VND36 trillion to implement the Government’s resolution on providing support in cash to six groups who were suffering from the pandemic to ensure minimum living standards.

Despite a huge need for spending, State budget revenue was predicted to drop significantly as the COVID-19 pandemic caused a number of sectors, from production to trade and investment, to fall into difficulties.

The Government was also planning to issue policies to cut taxes and fees for businesses to help them overcome the difficult time, which also caused drops in budget revenue in the short-term.

At the same time, tumbling crude oil prices coupled with slow restructuring and privatisation of State-owned enterprises weighed on budget revenue.

The revenue from SOEs’ restructuring and privatisation was planned at VND45 trillion this year. However, after four months, no collection has been recorded.

According to Minister of Finance Dinh Tien Dung, if the pandemic eased in the second quarter of this year, the best scenario, GDP would expand 5.3%, 1.5 percentage points lower than the Government’s plan. In this scenario, crude oil prices were projected to average US$35 per barrel and the plan of privatising SOEs failed, the State budget revenue was estimated to drop by VND140-150 trillion.

Bigger reductions in the State budget revenue were projected if GDP growth was below five percent as per the forecasts of several international organisations.

To ensure adequate sources for spending amid the COVID-19 pandemic, the Government asked ministries, agencies and local authorities to cut at least 30% of expenses for conferences and domestic business trips and 50% for international trips, which could help save VND600-700 billion.

The ministry was also negotiating with donors for the most preferential lending terms. It was estimated that loans with low rates from international organisations could be around US$1 billion.