The Ministry of Planning and Investment is collecting feedback on a stimulus package to facilitate economic recovery following the devastation wreaked by the fourth Covid-19 wave.
Nguyen Duc Kien, head of a group of consultants to Prime Minister Pham Minh Chinh, said that the package will be valued at least VND500 trillion ($22.03 billion), equivalent to the nation’s annual public investment.
Some experts have said that the figure could even reach VND800 trillion, and that fiscal policy is an option to mobilize funding.
Vietnam is set to have a public debt ratio of 43.6 percent of GDP this year, far below the 55 percent threshold. It also has nearly $100 billion in foreign exchange reserves.
Using fiscal policy to mobilize funds for recovery might cause budget deficit and public debt to rise, but these figures will still remain under control and at lower levels than other countries in the region, said Can Van Luc, member of the National Monetary Advisory Council.
International organizations like the International Monetary Fund, the World Bank and the Asian Development Bank are willing to “give us loans with interests rates of under one percent,” he told VnExpress.
“If exchange rates are stable, foreign loans are possible.”
Whether the stimulus package is VND500 trillion or VND800 trillion, there will be sufficient resources, Kien said.
The government can use the money to invest in projects without seeking to recoup capital, because this will generate taxes from businesses that benefit from the package, he added
One example is a public-private partnership (PPP) highway, which often takes 15-20 years for the government to recoup its investment from tolls, Kien said.
Instead, if the government joins hands with the developer in building the road, businesses that benefit from it the road will see their revenues rise and will pay higher taxes, helping recoup the original investment, he added.
In terms of monetary policy, experts advise that the government avoids repeating the 2009 story when a stimulus package caused inflation to surge.
Luc said that incentive loans should be given to loss-making companies with collateral and recovery prospects.
The support should last one year at most because state coffers are limited, he added.
Ministry of Finance Ho Duc Phoc had said last week the ministry was considering giving businesses loans at annual interest rates of 2-3 percent. Priority would be given to infrastructure project developers.
Another possible source of money is idle cash with the public, which can be tapped through foreign currency bonds and even short-term bonds.
Overspending could rise in 2022 and 2023, but will drop in 2024, ensuring that the five-year target of controlling overspending is achieved, Phoc said last month.
Luc, however, said that foreign currency bond issuance should be considered carefully as it could exert pressure on foreign exchange rates and the macro economy.
Experts say that another way to mobilize funds is to clear administrative blockages in existing projects, which will boost private investment.
Over 2,000 real estate projects are facing delays due to administrative procedures, and if these issues are resolved the government can collect money from land fees while businesses create jobs.
Le Duy Binh, CEO of consultancy Economica Vietnam, said public investment was extremely slow at the moment, and speeding this up will help boost growth and fuel manufacturing as well as consumption.