Brian Jeffrey
The financial situation in Vietnam shows significant pressure on its resources, primarily due to the high costs associated with government operations. There is an immediate need to enhance the efficiency of government functions to make better use of the budget.
The Ministry of Finance estimates that state revenue for 2023 will be around VND 1.75 quadrillion, while expenditures are expected to total VND 1.73 quadrillion. Of this total, recurrent costs – which cover the operational expenses of the government and socio-political organizations – will account for VND 1.05 quadrillion, or approximately 61% of overall spending.
In 2022, Vietnam reported state revenues exceeding VND 1.82 quadrillion and expenditures at around VND 1.75 quadrillion. Recurrent costs again dominated, making up VND 1.03 quadrillion or 59% of total expenses.
For the last ten years, recurrent expenses have remained steady, occupying about 60–65% of total government spending. The leftover funds are directed toward developmental projects and debt repayments, with the government often resorting to borrowing to cover deficits. In 2022, borrowing reached VND 488.4 trillion to manage budget shortfalls and finance development initiatives.
From 2012 to 2022, state revenues increased significantly, growing 1.75 times from VND 1.03 quadrillion to VND 1.82 quadrillion. However, recurrent expenditures also saw a substantial rise of 1.71 times, from VND 603 trillion to VND 1.03 quadrillion during the same decade.
In 2020, recurrent expenditures exceeded VND 1 trillion for the first time and have displayed consistent growth since. This trend highlights the increasing scale and costs tied to Vietnam’s administrative framework, leading to considerable pressure on the national budget.
High levels of recurrent spending restrict the finances available for essential development projects. In 2022, development investment stood at only VND 615.6 trillion, a stark contrast to recurrent expenditures. Additionally, debt servicing claimed a significant share of the budget, with interest payments around VND 96 trillion and principal repayments close to VND 200 trillion.
The ongoing budget deficit—where expenditures surpass revenues—compels the government to borrow extensively each year, posing challenges to long-term financial stability and growth potential.
If Vietnam does not implement bold reforms to streamline its administrative framework and trim recurrent costs, it may face inefficiencies in how it allocates resources. These inefficiencies could impede the country’s progress toward ambitious development aspirations, such as achieving high-income status by 2030.
To ensure fiscal sustainability, it is crucial to enhance the efficiency of administrative functions, optimize workforce size, and improve public service effectiveness. A shift towards prioritizing development investments will stimulate economic growth and establish a solid foundation for Vietnam’s future.
