The problem of revenue and expenditure of the new Minister of Finance

On April 8, the National Assembly approved Mr. Ngo Van Tuan to hold the position of Minister of Finance for the 2026-2030 term. Mr. Tuan took on the task when Vietnam was at a turning point with a breakthrough goal of maintaining growth of over 10% per year in the next 5 years to become a developed country by 2045.

“The high economic growth target places great demands on the financial sector,” Mr. Tuan said when taking office and said that in the current context, in addition to revenue and expenditure management, the Ministry also plays the role of advising on macroeconomic management strategies.

He added, “Budget revenue, expenditure management and mobilization of investment capital for development will have to be upgraded to ensure proactive, flexible and effective”.

In fact, the fiscal picture of the past 5 years with many bright colors is the foundation for the operator. Total budget revenue for 2021-2025 is estimated at 9.75 million billion VND, exceeding the set target thanks to tax management reform and digitalization. Regular spending has been tightened, helping the budget deficit stay at a low level of 3.1-3.2% of GDP. In particular, public debt reduces from 42.7% of GDP in 2021 to around 36-37% of GDP in 2025, much lower than the ceiling allowed by the National Assembly.

Dr. Nguyen Quoc Viet, public policy expert at the University of Economics (Hanoi National University), said that this financial space allows “the Government to boldly mobilize capital for large-scale infrastructure projects while still ensuring national financial safety.”

The budget revenue structure is also shifting in a more sustainable direction as the main revenue sources (except from crude oil) are increasing. Last year, the proportion of domestic revenue accounted for more than 86% of total state budget revenue. Revenue from import and export also increased by nearly 18% over the same period in 2024 thanks to total import and export turnover recording a record level of more than 920 billion USD.

Revenue from crude oil alone will decrease by 18% compared to the same period in 2024. The fact that the budget no longer depends heavily on resources, such as crude oil, but on the internal strength of the economy shows that the “health” of public finances is becoming more and more solid in the face of external shocks.

However, Mr. Viet noted that this “fulcrum” could shake if revenue continues to depend on cyclical items, such as land. Experts have cited statistics from 2005 to present showing that the proportion of budget revenue from land, including land use fees, is the largest, accounting for 13.1-16% of total domestic revenue. This cash flow depends on real estate market fluctuations.

Dr. Viet said that budget revenue is currently showing signs of slowing down due to the high background effect from previous years and the internal difficulties of the economy. This poses a risk of revenue shortfall in the near future.

Next is the pressure to remove public investment disbursement bottlenecks. In the 2021-2025 period, although the disbursement value next year is always higher than the previous year, the slow progress situation has not been completely overcome. The cyclical limitation of public capital disbursement is that it is often “congested” in the last quarter of the year. For example, last year, according to data from the Ministry of Finance, by the end of November, more than 360,000 billion VND (equivalent to about 40% of the plan) could not be disbursed.

Slow disbursement significantly affects the economic resilience, because public investment is still considered an important growth driver. According to calculations in the period 2021-2025, the public capital disbursement rate increases by 1%, GDP increases by 0.058 percentage points.

“The operator needs to reform institutions to reduce compliance costs for businesses and help the private sector absorb capital more effectively,” Mr. Viet stated. Along with that, the public-private partnership (PPP) model needs to be more transparent to activate the flow of private and foreign capital into the fields of green infrastructure and high technology.

In addition to institutions, Dr. Le Xuan Truong (Academy of Finance) noted that the financial industry also needs to associate budget allocation with measurable KPI indicators. “It is necessary to resolutely cut ineffective expenditures to concentrate efforts on key infrastructure, not spreading it too thinly,” he added.

Finding a “fulcrum” for capital outside the budget is also a challenge for the new Minister of Finance in this term. To maintain a continuous growth rate of over 10% per year in the next 5 years, the economy needs to “inject” about 8.22 million billion VND of public investment capital – nearly 3 times more than the previous period. This capital flow, according to the Government, will be given maximum priority to projects that are groundbreaking, transformative and turn the situation around such as key projects and national strategies.

This problem creates operating pressure when fiscal policy must ensure flexibility, be “opened” at the right time, and support growth. At the same time, budget discipline also needs to be tightened to avoid creating too much debt repayment pressure for the next period.

While budget capital is limited, long-term capital mobilization channels such as the stock market and corporate bonds have not developed adequately. This makes bank credit the main capital channel. Dr. Viet believes that at this time, the new Minister of Finance needs to have strong decisions to revive the corporate bond market – the medium and long-term capital lifeblood of the economy, thereby reducing bad debt pressure on the banking system.

He proposed the need to establish a special mechanism (institutional sandbox) to completely handle bad debts and clear up “backlog” projects in the real estate and energy sectors. “This helps reduce capital pressure on the banking system, creating fiscal space without the State having to inject more money directly,” Mr. Viet commented.

Sharing the same opinion, Dr. Le Xuan Truong (Academy of Finance) said that authorities need to complete the legal framework for the stock market, as well as accelerate the completion of financial centers in Da Nang and Ho Chi Minh City according to international standards.

However, the decisive factor for the success of fiscal policy is still people. Dr. Truong believes that the team of civil servants in the financial sector needs to best meet the requirements of digital thinking and skills, while also having enthusiasm and integrity.

“In fact, some state agencies and local governments improperly implement policies, creating bottlenecks in administration. Therefore, it is necessary to handle this problem to increase policy effectiveness,” he added.