Flexible monetary policy in response to coronavirus crisis

The flexible management of fiscal policy, especially in payment deferral and waiver of taxes and fees for the first five-month period, has been a useful instrument in helping the businesses and people cope with Covid-19 impacts.

Minister of Finance Ho Duc Phoc made the statement in a meeting of the National Assembly’s Standing Committee on June 15.

Minister of Finance Ho Duc Phoc. Source: Quochoi.vn

In the January-May period, the Vietnamese Government has extended the payment deadline for taxes and land rental fees worth VND21 trillion (US$915.6 million), while around VND2.46 trillion (US$107.1 million) in taxes and fees were exempted or reduced to support production and business activities.

“The government has been actively managing the budget to ensure sufficient fund allocation for the Covid-19 fight, as well as the general elections held in May,” Phoc added.

According to Phoc, in 2020, nearly VND21.1 trillion (US$919.4 million) from the State budget has been spent to aid the Covid-19 prevention and control efforts, while VND14.5 trillion (US$631.8 million) was earmarked for Covid-19 vaccines purchase.

Despite the severe Covid-19 impacts, State budget revenue in the first half of this year is expected to reach 55.5% of the estimate, up 11% year-on-year and around the same level of 2019, while budget expenditure would be around 34.15% of the plan.

While there has been progressed in State budget management, Phoc acknowledged current shortcomings, including the low budget collection from the ongoing privatization process of State-owned enterprises, along with growing tax evasion and tax losses from online businesses.

The disbursement rate of public funds in the five-month period remained low compared to the plan, including the modest disbursement rate of projects financed by ODA funds at 2.97%, indicating “public investment has not been serving as a driving force for economic growth,” Phoc suggested.

A clear roadmap for the Covid-19 vaccination program required

For the last half of the year, Minister Phoc expected growing risks and challenges for the economy amid growing uncertainties surrounding the Covid-19 situation.

“High inflationary pressure, natural disasters, and the modest contribution from the private sector to growth compared to their foreign peers are among issues that put pressure on the State budget,” he added.

“Failure to soon contain the pandemic would cause major impacts on economic activities and state budget,” Phoc stressed.

During this context, Phoc called for the Government to continue pursuing the twin goal of both containing the pandemic and boosting economic recovery.

At the meeting, Vice Chairman of the Finance-Budget Committee under the National Assembly Dinh Van Nha suggested the Government continue drafting new policies to support the people and business community affected by the pandemic.

“Drastic measures are needed to put the pandemic under control, including a clear roadmap for vaccination program to achieve herd immunity,” said Nha.