Major master of international trade policy and law

MINISTRY OF EDUCATION AND TRAINING
FOREIGN TRADE UNIVERSITY

DISSERTATION

IMPACT OF LOW OIL PRICE ON VIETNAM’S STATE BUDGET

Major: Master of International Trade Policy and Law

Full name: Nguyen Thi Mai Anh

Ha Noi-2016


MINISTRY OF EDUCATION AND TRAINING
FOREIGN TRADE UNIVERSITY

DISSERTATION

IMPACT OF LOW OIL PRICE ON VIETNAM’S STATE BUDGET

Major: Master of International Trade Policy and Law

Full Name: Nguyen Thi Mai Anh
Supervisor: Assoc. Prof. Dr. Hoang Xuan Binh

Ha Noi- 2016


i

REASSURANCE
I declare that this is my own research. The data and
results outlined in the dissertation are honest and have
never been published in any other projects. I hereby
declare that all the help for the realization of this thesis
was to thank and information cited in the thesis was to
specify the source.


ii

ACKNOWLEDGEMENTS
At first, I would like to express our profound gratitude to Assoc.
Prof. Dr. Hoang Xuan Binh who had given me not only valuable
instruction and motivation but also great encouragements and
tremendous supports with his all enthusiasm during the time I had
prepared this study research.
Furthermore, I also want to dispatch a special thanks to program
of Master of International Trade Policies and Laws in general and to
teachers in the Faculty of Graduate Studies for giving me
opportunity to study on such an interesting and meaningful learning
program.
Finally, I am obliged to quite a few scholars whose papers and
books I have referred to. It is from their achievements that we draw
rich thoughts for this study research.


iii

TABLE OF CONTENT

REASSURANCE .................................................................................................i
ACKNOWLEDGEMENTS .................................................................................ii
TABLE OF CONTENT ..................................................................................... iii
LIST OF ABBREVIATION ............................................................................... vi
LIST OF TABLES ............................................................................................vii
LIST OF FIGURES ..........................................................................................viii
CHAPTER 1: INTRODUCTION ........................................................................ 1
1.1. The necessity of the research ...................................................................... 1
1.2. The objective of the study research ............................................................. 2
1.3. The scope and subject of research............................................................... 2
1.4. Research Methods ...................................................................................... 3
1.5. The scientific and practical meanings ......................................................... 3
1.6. The study’s content .................................................................................... 4
CHAPTER 2: LITERATURE REVIEW.............................................................. 5
2.1
2.1.1

Current Situation ........................................................................................ 5
Overview of the government’s budget and Vietnam current situation ...... 5

2.1.1.1 Definition ................................................................................................ 5
2.1.1.2 Factors affecting government budget....................................................... 7
2.1.1.2.1 Government revenue ............................................................................. 7
2.1.1.2.2 Factors affecting revenues budget and classification revenues budget ... 9
2.1.1.2.3 Government Expenses ........................................................................ 11
2.1.1.3 Current situation of Vietnam’s government budget .............................. 12


iv

2.1.1.4 State budget deficit................................................................................ 18
2.1.2

Overview of oil prices ........................................................................... 22

2.1.2.1 Definition .............................................................................................. 22
2.1.2.2 Impact of oil prices fluctuation on the economy .................................... 22
2.1.2.3 Factor affecting oil price ....................................................................... 25
2.1.2.4 Current situation of oil market in the world ........................................... 28
2.2

Previous related Research ......................................................................... 32

CHAPTER 3: EMPIRICAL STUDY ................................................................. 35
3.1

Relationship between oil prices shock and the government’s budget ........ 35

3.1.1 Model specification and data collection .................................................... 35
3.1.2 Economic theory review ........................................................................... 35
3.1.3 Expectations ............................................................................................. 40
3.1.4 Data Collection......................................................................................... 40
CHAPTER 4: ANALYSIS RESULTS AND DISCUSSION ............................. 42
4. 1. Analysis data result .................................................................................. 42
4.1.1. Unit Root and Stationary Tests ................................................................. 42
4.1.2. Original regression model ........................................................................ 42
4.1.3. Eviews results .......................................................................................... 42
4.1.2.1.

Test of significance ............................................................................ 44

4.1.2.2.

Testing of dropping variables ............................................................. 44

4.1.2.3.

Parameters interpretation ................................................................... 47

4.1.2.4.

Errors in the model ............................................................................ 48

4.1.4. Interpretation of model ............................................................................. 52
4. 2. Limitations ............................................................................................... 53
CHAPTER 5: SOLUTIONS AND CONCLUSION ........................................... 55


v

5.1. Solutions..................................................................................................... 55
5.1.1. Orient the government budget revenue in the near future .......................... 55
5.1.2. Develop refineries to increase value ......................................................... 55
5.1.3. Prevent loss and increase government’s revenue ...................................... 56
5.1.4. Control the state’s budget deficit .............................................................. 57
5.1.5. The financial measures to control the state budget deficit ......................... 59
5.1.5.1 Shift of the state budget of revenues towards sustainability ................ 59
5.1.5.2 Improving decentralized budget .......................................................... 60
5.1.6. Create other tools to offset state budget deficit ......................................... 61
5.1.6.1 Domestic borrowings .......................................................................... 61

5.1.6.2 Foreign Borrowing ............................................................................. 62
5.1.7. Reform of public administration and improve management capacity ........ 65
5.1.8. Develop financial management systems and accounting of public finances
systems ................................................................................................................. 66
5.1.9. Innovate fund management mechanism, financial institutions ................. 67
5.1.10. Determine the state budget deficit amid after crisis ................................ 68
5.2. Conclusion ............................................................................................... 69
REFERENCES .................................................................................................. 71
APPENDIX ....................................................................................................... 76


vi

LIST OF ABBREVIATION
CPI

Consumer Price Index

GDP

Gross Domestic Product

EIA

Energy Information Administration

ERP

Enterprise Resources Planning

FDI

Foreign Direct Investment

ICOR

Incremental Capital Output Ratio

IMF

International Monetary Fund

ODA

Official Development Assistance

OECD

Organization for Economic Cooperation and Development

OPEC

Organization of Petroleum Exporting Countries

SOE

State-Owned Enterprise

TABMIS

Treasury and Budget Management Information System

VIF

Variance Inflation Factors

WTI

West Texas Intermediate

WTO

World Trade Organization


vii

LIST OF TABLES
Table 1: Government budget spending over the years (billion USD) ..................... 14
Table 2: Governments’ budget spending for development investment and recurrent
spending ................................................................................................................ 15
Table 3: Expenditure decentralization of the central budget and local budget ........ 17
Table 4: Oil revenue in Total Government Revenue (%) ....................................... 24
Table 5: Description data ....................................................................................... 41


viii

LIST OF FIGURES
Figure 1: Budget revenue from 2005 to 2014 ......................................................... 13

Figure 2: Proportion of GDP in Government’s Budget .......................................... 13
Figure 3: Government’s revenue from domestic .................................................... 14
Figure 4: Expenditure decentralization of the central budget and local budget ....... 16
Figure 5: Brief State budget over years .................................................................. 19
Figure 6: Percentage of Deficit/ GDP .................................................................... 20
Figure 7: World crude oil consumption (Thousand barrels per day) ....................... 28
Figure 8: World oil price data in 1989-2015 .......................................................... 30
Figure 9: Export and import crude oil quantity in Vietnam from 2010-2015 .......... 32
Figure 10: Vietnam’s government Balance Budget (billion USD).......................... 36
Figure 11: Vietnam’s oil imports data .................................................................... 37
Figure 12: Vietnam’s Real GDP and government balance budget movement from
1989 to 2014.......................................................................................................... 38
Figure 13: Annual average value of world oil price from 1989 to 2014 ................. 39
Figure 14: List of Vietnam refineries and their capacity ........................................ 56


1

CHAPTER 1: INTRODUCTION
1.1.

The necessity of the research

Oil and fuel is one of the most important input in the production process of a
modern economy, a significant proportion of oil used to produce electric energy and
fuel of all vehicles to transport goods to market; The remaining are used for the
production of petrochemicals to plastics, solvents, fertilizers, asphalt, pesticides and
many other products.
Vietnam had started exporting crude oil since April 1987 (Nguyen Manh
Thuong, 2015). According to the data collected from the General Statistic Officer’s

annual report, in 1991, crude oil exporting quantity was three million tons. In 2003,
this exports amount was reach at about 20 million tons per year and then descending
in 2015 to 9.18 million tons per year. Meanwhile imports of petroleum Vietnam in
2015 was 10.1 million tons greater than the crude oil export.
Due to the important given role of oil, oil price fluctuations may affect the
operation of the economy in general. The increase in oil prices causes a temporary
reduction of total production, because oil is a fundamental element in input factor of
production thereby affecting exports reduced the trade balance of the country.
Higher oil prices also led to price increases of other goods caused to inflation. To
curb inflation, the central bank was forced to sacrifice economic growth, investment
and apply tightening the monetary policy. In the other situation, when the oil price
decreases, the revenue from exporting crude oil reduces consequently. In this case,
government revenue would become smaller if other factors remain unchanged.
Most previous studies related to shocks or instability of oil prices on economic
activity will be carried out in developed countries situation, especially the US. The
research related to the impact of oil price fluctuations in the economic context of the
developing countries very little. This is due to the lack of reliable data and also
because of less dependence on oil in the history of the developing countries.
However, since the energy demand of the country is increasing, the study of the


2

influence of oil price fluctuations on the economy in countries such as Malaysia,
Thailand, Indonesia, etc. also was performed. Acquiring the result from the
research, I conducted a study "Impact of low oil prices on Vietnam government
budgets".
The reason I made this study because of the role of oil for Vietnam's economy is
not only reflected in the application. It also stimulated Vietnam’s economy to take
pass backward agricultural era and became developing countries with average

growth rates of 7.3% per year; crude oil exports contributed 26%-30% in the state
budget, 18%-22% to the GDP, and exports of crude oil accounts for about 16% of
the average total value of exports per year. Although Vietnam is a crude oil exporter
but most serve domestic consumption must be imported. This issue would be the
same in the near future. Consequently domestic oil price is greatly affected by price
fluctuations on the world market. And oil's role becomes even more important
factor to become an oriented industrial country in the near future.
1.2.

The objective of the study research

This study aims to analyze the impact of fluctuations in oil prices through the oil
revenue variable, the real GDP variable and money supply on the government
budget variables, then answer the question how much the change in oil price affects
Vietnamese government budget. Consequently, based on the finding results of
historical data, addressing suspected problems and quantified the relationship and
impacts of the oil prices and government budget. After those findings, this study
supposed to give basic solution to prevent and reduce the effect of oil price on the
government budget in specific and expand to other economic variables in general.
1.3.

The scope and subject of research

After taking into consideration the available of data sources as well as empirical
studies have been conducted in countries around the world and for the purpose of
research, this study research was conducted based on data from the time series
annually monitoring from 1989 to 2014 of Vietnam government budget balance in


3

relation to world oil price variable, the value of real GDP, and the money supply
variable.
1.4.

Research Methods

The objective of this paper is to investigate the dynamics of the relationship
between oil revenue, government budget and money supply in Vietnam using the
annual data for the period 1989 to 2014. In this study, the variables are world oil
price (OILPRICE), government budget balance (GOVB), real GDP (GDPR) and
money supply (M2). OILR, GDPR and M2 the variables are taken in their natural
logarithms to avoid heteroscedasticity. There are a large number of macroeconomic
variables which affects government budget and may equally be considered, beside
oil price, real GDP and money supply M2. Including such variables into the
specification increase the fit of the model, but would decrease the degree of
freedom. For this reason the model is restricted to only these three interested
variables. To reach the purpose of this study some econometrics techniques are
employed, especially the Ordinary Least Square method to estimate the impact of
oil revenue on budget deficit. The entire estimation consists of three steps: first,
specification model, second, coefficient and other related test, third, the detection
errors in models then correcting the errors (if any).
1.5.

The scientific and practical meanings

Vietnam is one of countries with large reserves of crude oil in the world, ranked
at number 28 in the world. Vietnam's oil and oils with a high price (According
Petrotimes). However, the recent sharply decline in oil prices led to more potent
effects or activate various risks. The most visible is the decrease in crude oil prices

led to the country's export volume decreased, so the state budget revenues from
crude oil would be affected. Also the real GDP and money supply M2 in Vietnam
was taken into consideration.
The research results can help quantify level of impact of oil prices on the state
budget and listed out the risk that low oil prices may have on the national Vietnam.


4

1.6.

The study’s content

This study was demonstrated in five chapters as listed below:
Chapter 1: Introduction
Chapter 2: Literature review
Chapter 3: Empirical Study
Chapter 4: Analysis results and discussion
Chapter 5: Solutions and conclusion.


5

CHAPTER 2: LITERATURE REVIEW
2.1 Current Situation
2.1.1 Overview of the government’s budget and Vietnam current situation
2.1.1.1 Definition
As stipulated in the Law on State Budget 2015, government’s budget is defined
as all the revenue and expenditure of the Government which had been projected.
The budget would be used in a certain period of time and under the regulation and

planning of certain authorized state’s department in order to ensure well
performance of the government in their own functions and responsibilities. In
simplicity, government budget contains system of the economic relationships
between the government and the social entities in the form of value, generated
during the formation of the state, distributing and using the biggest concentrated
monetary fund of the state to ensure ability of affordable for the financial for one
state all functions of the state work perfectly.
The function of government’s budget is the act of redistributing financial
resources. It is shown in both revenues and expenditures of the state. Government’s
budget is tightly associated with state ownership and always carries common
interests and public interests. It also has common characteristics of other monetary
funds. However, the difference of the government’s budget is a concentrated
monetary fund of the state and it is divided into many smaller funds with specific
functions and then used for certain planned purposes. Moreover, revenues and
expenditures of Government’s budget are following mostly in indirect obligation
principle.
Government’s budget occurs balance position when the relation between
revenues and expenditures of the government’s budget becomes balanced in a
period of time (usually estimated a year). This definition of the balance
government’s budget is initiated by the objective needs of allocating and regulating
revenues and expenditures of government’s budget in the movement of financial


6

resources. It is also the economic process where the state has applied measures to
regulate finance to control and regulate the distribution of social financial source.
In terms of its nature, government’s budget is the balance between financial
resources that the state gathered to the government’s budget in a year, and the
allocated resources, used to satisfy the needs of the government in that year.

Generally, government’s budget balance reflexes the relation between revenues and
expenditures of government’s budget in a fiscal year and the suitability in the
mechanism of revenues and expenditures of government’s budget, to implement the
objectives of develop economy-society in macro scale as well as in each area and
section. From the point of view of the government’s budget management, its
balance is the balance of distributing and transferring resources between different
budget levels, thanks to which the authorities carried out their functions and duties
assigned.
The relation between revenues and expenditures of government’s budget in a
fiscal year is shown in the following situations:
(i)

Government’s budget balance: the revenues mobilize just sufficient to

cover expenditures.
(ii)

Government’s budget surplus: revenues are greater than expenditures.

The state has recalled more resources than or has not built a reasonable expenditure
plan equivalent to the revenues or economy grows so well that extraordinary budget
increases and the state can allocate the surplus for the next following years.
Government’s budget overspending (loss): it means that expenditures of
government’s budget are greater than its revenues. In this case, government
revenues do not meet the expenditure needs. The reason for that may come from the
situation that the state cannot schedule the expenditure needs suitable with its
capacity; unreasonable expenditures and investments causes waste; due to loss of
budget revenues; but it can also be due to the degraded economy period or affected
by natural disasters or war.

7

2.1.1.2 Factors affecting government budget.
To analyze the factors can have influence on government budget, it is necessary
to come up with the most basic formula (Mankiw, 2007):
B=T–G
While:
B: Government budget
G: Government spending
Y: Government revenue
2.1.1.2.1

Government revenue

Firstly, the financial resources focused on government budget is the State's
income formed in the process which the State distributed the social wealth under
value form. Government revenue reflects the economic relations arising in the
process of distributing the national financial resources between the State and social
actors. That distribution is an objective necessity; it derives from the existence
requirements and development requirements of the State apparatus as well as the
performance requirements of the society- economic functions of the State. The
division object is a national financial resources, is the result which domestic
productive labor creates under currency form.
Secondly, in terms of content, government’s revenues budget contain the
distribution relationships under the value form arising in the process which State
uses its power to focus on partly national financial part to form the centralized
monetary fund of the State.
Finally, a further important feature of government’s revenues budget is that it
ties to the current economic situation and the movement of the value categories

such as prices, interest rates, income. For example, when prices rise then revenues
fall as the result; Income increases leads to revenue increase; exchange rate


8

increases then revenue increases; interest rates increase (investment decreases)
revenues would fall consequently. The movements of those categories have the
impacts on the increase or the decrease of the revenue level, put demand on
enhancing the regulatory role of the tools in government’s revenues budget.
Revenue in government’s budget balance is the planned receivables of State in
order to balance the budget. These amounts include taxes, fees, State income,
receivables from selling or leasing property owned by the State and other
receivables.
Taxes are partly compulsory mobilization forms of personal income, the
corporation income for State to ensure the spending needs of State. Taxes are
compulsory contribution amount, not repayment directly.
The fees are receivables prescribed by the State to serve the State administration
as required or prescribed by law. Collected fees are used to offset the arising
expenses when handling affairs of the management department directly or
indirectly. Fee is to serve the fee payers on the implementation of the number of
administrative procedures and to encourage, contributing to government’s budget.
Fee is collected by the State in order to offset part of expenditures of The
Government's Budget that is used for: the construction, procurement, maintenance
and management of national assets; sponsoring organizations and individual
business activities, public activities such as transportation. Fee is identified as an
indemnity and mandatory payment when an individual or organization is entitled to
have benefits or use a public service provided by the State, so fee is directly
refunded.
Other revenues help balance the budget, also known as compensated revenue for

budget deficits. In the State Budget Deficit, the government should have offset
solution for that deficit, because it is impossible to prolong the state budget
imbalance. Revenues compensate for budget deficits, which is essential loan to
compensate, including domestic loans and foreign loans. Domestic loan is


9

conducted through the issuance of bonds, government bonds to mobilize idle money
of the community. Foreign loan is conducted in borrowing foreign or receiving
foreign support, international non-financial institutions.
Expenditure in government’s budget balance is the planned payable of State in
order to balance the budget and accomplish State’s functions and responsibilities.
These amounts include expenditures on development investment, recurrent
expenditure, repayment of debt and provision of aids, and transfer to financial
reserve fund.
Development investment expenses can be understood as distribution procession
and use the budget to build up or improve the infrastructure, social-economic,
stimulate production in order to create a stable environment to develop
macroeconomics and the whole society.
The recurrent expenditure was the item in which assures to meet the financial
demand of government in their functions and duties. It contains stable features, and
can be classified as consumption of the government.
Repayment of debt and provisions of aids are the fund to make payment back to
others who lend or support the government in the past. It aims to offset
government’s obligation in debt (from domestic or foreign investors).
The financial reserve fund is the government’s fund with the purposes of
advance payment for financial need of government when the projection cannot
cover the year expenditure; performing activities to prevent or remedial disaster.
2.1.1.2.2

Factors affecting revenues budget and classification revenues budget

A crucial issue in government policy determines the field of encouragement and
proper and reasonable encouragement level. That not only affects State Budget
revenue but strongly impacts on the process of economic and social developments.
The level of encouragement is influenced by many factors of economic, political


10

and social situation in the country. Firstly, state budget revenues were considered to
be included:
(i) GDP: a factor that objectively determines the encouragement of the State
Budget, so when to assign the budget mobilization, State should consider
this criteria.
(ii)

Revenues from the sale or lease the resources and assets under State
ownership

(iii)

Revenues from debt and non-refundable aid of foreign governments,

organizations

and

individuals,

from

voluntary

contributions

of

organizations and individuals domestically and internationally.
(iv)

Aid from another level of government (intergovernmental aid): in the

United States, federal grants may be considered non-tax revenue to the
receiving states, and equalization payments
(v)

Loans, or other borrowing, from the international monetary fund or
other government also.

(vi)

Revenue (including interest or profit) from investment funds

(vii)

Revenues from liquidation of state’s properties

(viii) Rents, concessions, and royalties collected by the state when it

contracts out the right to profit from some good or service to a private
corporation. An example is contracts for resource extraction between
government and an individual or an organization (for extracting natural
resources as minerals, timber, petroleum and gas, or marine resources)
collected privately under license from state-owned areas.
(ix)

Fines collected and assets forfeitures as a penalty. Examples include

parking fines, court costs levied on criminal offenders
(x)

Fees in which citizen have to paid in the granting or issuance of

permits or licenses. Examples include vehicle registration of plate
permits, vehicle registration, building fees, driver's licenses fee, hunting
and fishing licenses, fees for professional license, fees for granting visas
or passports, and land grading (which causes silt), and sometimes for


11

increasing storm water runoff, destroying local vegetation, and cuttingdown trees. User fees collected in exchange for the use of many public
services and facilities. Tolls charged for the use of toll roads is an
example Donations and voluntary contributions to the state
(xi)

Capital receipts

(xii)

Other revenues: Non-tax Revenue (from economics) such as revenue

from fines, confiscation and forfeiture of assets, etc.
The classification of State Budget revenues has practically significant in the
analysis, evaluation and management of State Budget revenues. There are two
common classifications:
Classified according to the economic content:
(i) Regular revenues often have nature of mandatory, including taxes, fees
and charges for specific forms prescribed by law.
(ii) Casual revenues include revenues from economic activities of the State,
such as activities of collecting, selling or leasing state-owned property
and other charges mentioned above.
Classified according to the mobilizing capital requirements on the State
Budget:
(i) Revenue in the State Budget balance includes revenues not collected
regularly and frequently.
(ii) Revenue compensates for the State Budget deficits: The State Budget
revenues cannot meet the demand for spending and the State have to
borrow more, including domestic loans from the population classes, the
economic - social organizations, foreign loans.
2.1.1.2.3 Government Expenses
Over the years, the role of the state budget in Vietnam have demonstrated in
helping the state form market relations and contribute to control inflation,
appropriate interest rates in order to create healthy national finances, ensure the
stability and development of the economy. Besides, the state budget still faces the


12

existence as the inappropriately use, the weaknesses in the management of revenue
and expenditure shows us the view more insightful about the status of state budget
deficit and its impact to the economic activity which is extremely large.
Therefore, the following factors were considered to have impacts on the
government expenditure:
(i)

Politics and foreign policy of the State

(ii) Government policy to control the macroeconomic by fiscal or monetary
policy.
(iii) Final consumption expenditure
(iv) Infrastructure and investment
(v) Transfer payment
2.1.1.3 Current situation of Vietnam’s government budget
In 2015, budget revenue had affected because the world crude oil price fell
sharply from 100 USD to 56.2 USD per barrel (An. T, 2016) as well as the
government carried out tax reduction and tax break policies. According to a data
compiled, the total budget revenue in 2015 reached 996,870 billion dong - increased
13.58% (119,773 billion dong) compared to the first estimate and 85,770 billion
dong and greater than the revenue in the report to the Parliamentary 69,370 billion
dong. In the same year, the total government budget spending was estimated to
1,262,870 billion dong (An. T, 2016) – reached 10.1% higher compared to the
estimate
In terms of government revenue, according to final data by the General Statistics
office from 01/01/2014 to 31/12/2014, the domestic revenue was 90.81%; oil
revenue was 85.13%; the budget balance revenue from export activities was 89.01%
compared to the estimation. In the area of domestic revenue, revenue from stateowned enterprises was 98,16%; revenue

from foreign investment enterprises

(excluding crude oil) was 90.15%;personal income tax was 99.04%; charges and
fees was 64.41% compared to the estimation.


13

Figure 1: Budget revenue from 2005 to 2014

Total Government Revenue from 2005 - 2014
877697
828348,0
734883,0
721804,0

900000,0
800000,0
700000,0

558158,0

600000,0

442340,0
416783,0

500000,0
400000,0

279472,0315915,0

228287,0

300000,0
200000,0
100000,0
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Total Government Revenue (Billion dong)

(Source: General Statistics Office)
In the period 2005-2014, total government budget revenue increased in absolute
numbers, the average growth rate was 16.61% per year. However, the percentage of

GDP in revenue budget quite stable over the years; the average rate was 23.27% in
the period 2005-2014:
Figure 2: Proportion of GDP in Government’s Budget

Revenue from GDP (%)
030%
025%

025%

024%

025%
020%

024%

023%

024%
021%

022%

015%

Revenue from GDP (%)

010%
005%

000%
2005 2006 2007 2008 2009 2010 2012 2014

(Source: data.worldbank.org)


14

The growth rate of domestic revenue increased over the years with considerable
speed. In the period 2005 - 2014, the domestic revenue reached 67.62% of total
government revenue. It meant that the government further focused on the intrinsic
strength of the domestic economy.
Figure 3: Government’s revenue from domestic

Revenue from domestic (billion dong)
700000,0
593560
567403
477106,0
443731,0

600000,0
500000,0
400000,0

353388,0
269656,0
300000,0
229786,0
174298,0

200000,0
145404,0
119826,0
100000,0

Revenue from domestic
(billion dong)

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

(Source: General Statistics Office annual report)
.Regarding to the government expenditure, in recent years, government budget
spending was rising at high speed (2010: 15.25%; 2011: 15.36%, 2012: 10.72%,
2014: 5.06%)
Table 1: Government budget spending over the years (billion USD)
Government
Expenditure
% Growth rate of
Expenditure

2010

2011

2012

2013

2014

2015

6.95

8.01

9.24

10.54

11.67

12.26

15.25%

15.36%

14.07%

10.72%

5.06%

(Source: Ministry of Finance annual report)
As the result, the overspending of the government in 2015 was 256,000 billion
dong, made up 6.1% of GDP.
Due to the publication of government budget was announced data to 2014,
hence, this study report only analyze the figures from the past till 2014.

15

Table 2: Governments’ budget spending for development investment and
recurrent spending
(%)
Growth rate of
recurrent
expenditure
Growth rate of
development
investment
expenditure
Recurrent
expenditure/Total
Expenditure
Development
investment
expenditure/Total
Expenditure
Development
investment
expenditure/GDP

2007

2008

2009

2010

2011

2012

2013

23.26% 20.21% 24.15% 24.00% 29.20% 16.71%

2.72%

14.53% 51.82%

-8.55%

0.99%

13.73% 29.05%

1.07%

2014

53.77% 55.74% 54.05% 58.05% 59.30% 61.67% 64.71% 65.52%

27.39% 26.38% 32.31% 28.23% 26.45% 27.47% 24.97% 22.51%

5.73%

6.21%

8.94%

8.49%

9.09%

11.14% 10.68%

9.22%

(Source: Ministry of Finance annual report)
In the period from 2007 to 2011, recurrent spending budget increased with a
steady speed in recent years (from 23.26% in 2007 to 29.20% in 2011). However,
this growth rate had been sharply decreased in 2012 and 2013, at 16.71% and
2.72% respectively. Growth rate of investment spending also experienced the same
trend. It can be seen from the above table that the growth rate of recurrent spending
budget is greater than the growth rate of spending budget for development on
average.
The recurrent spending proportion in total government budget was fluctuated
from 2007 to 2014, 59.10% in average. According to an estimate data from Ministry
of Finance, this figure in 2016 will reach a high level at 64.72%. Therefore, in the
future, regular spending budget is required to be operated at a stable and moderate
level. Meanwhile, the ratio of budget for development investment in total
government budget decreased gradually from recent years because the demand of
regular spending increased, along with a better involvement of investment funds
from the residential and public sector in the total social investment capital. The