Vietnam faces budget pressures as administrative costs surge
Vietnam’s state budget struggles to balance revenues and spending, with over VND 1 quadrillion ($41.67 billion) annually allocated to maintaining the administrative apparatus.
Vietnam’s fiscal landscape reveals a heavy strain on resources, with the bulk of state spending allocated to maintaining the administrative apparatus. This underscores the urgent need for streamlining government operations to optimize budget efficiency.
According to the Ministry of Finance, state revenues for 2023 are estimated at VND 1.75 quadrillion, while expenditures are projected at VND 1.73 quadrillion. Of this, recurring expenditures - a category that includes operational costs for the state apparatus and socio-political organizations - amount to VND 1.05 quadrillion, or 61% of total spending.
In 2022, state revenues totaled over VND 1.82 quadrillion, with expenditures at VND 1.75 quadrillion. Recurring expenditures also dominated, accounting for VND 1.03 quadrillion, or 59% of total spending.
Over the past decade, recurring expenditures have consistently hovered around 60–65% of total spending. The remaining funds are allocated for development investment and debt repayment, often necessitating borrowing to fill gaps. For instance, in 2022 alone, the government borrowed VND 488.4 trillion to address budget deficits and fund development projects.
State revenues increased 1.75 times from 2012 to 2022, rising from VND 1.03 quadrillion to VND 1.82 quadrillion. However, recurring expenditures rose almost proportionally, increasing 1.71 times, from VND 603 trillion to VND 1.03 quadrillion during the same period.
In 2020, recurring expenditures surpassed the VND 1 trillion mark for the first time and have continued to grow steadily. This trend reflects the expanding size and high costs of Vietnam’s administrative system, which creates significant pressure on the national budget.
High recurring expenditures limit resources available for critical development investments. In 2022, development spending was just VND 615.6 trillion, significantly lower than recurring expenditures. Debt servicing also consumed a considerable portion of the budget, with interest payments reaching VND 96 trillion and principal repayments nearing VND 200 trillion.
The persistent budget deficit - where expenditures outstrip revenues—forces the government to borrow substantial amounts annually, constraining long-term financial stability and growth prospects.
Without decisive reforms to streamline the administrative apparatus and reduce recurring expenditures, Vietnam risks inefficiencies in resource allocation. Such inefficiencies could hinder the country's ability to achieve ambitious development goals, including becoming a high-income nation by 2030.
Streamlining administrative functions, optimizing workforce size, and enhancing efficiency in public services are critical steps to ensure budget sustainability. Shifting focus to development investments will help drive economic growth, creating a robust foundation for Vietnam's future. – Source: VNN –