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HCMC warns proposed budget cuts could have 'dire consequences'

By Nguyen Hoai October 23, 2016 | 11:45 am GMT+7

The city currently retains just 23 percent of its annual income, but the central government wants more.
Ho Chi Minh City officials have opposed a central government request for more of the city's income, citing the pressing need for better infrastructure.

A recent government request proposed leaving the city with just 17 percent of its annual income between 2017 and 2020 -- a five percent drop in what it currently holds.

During a meeting on Saturday, HCMC officials said they're already struggling to address major infrastructure problems like traffic and flooding and cannot afford to lose further revenue.

Municipal leaders have asked to retain at least 21 percent of the city's annual income.

Dinh La Thang, HCMC’s Party secretary, said a project to prevent flooding during heavy rains or high tides in the city, for example, will cost around VND97 trillion ($4.35 billion).

“We don’t know where to find that money yet,” he said.

While the city streets best known for their choked motorbike traffic, the skies overhead have likewise become overloaded, he said. Tan Son Nhat Airport has an annual design capacity of 25 million passengers and is expected to receive 32 million in 2016.

Ho Chi Minh City, the country’s largest metropolitan area, is one of five cities and provinces that can cover their own expenditures and contribute to the national coffers. The city took in nearly $12 billion, last year, as the country's largest moneymaker.

Nguyen Thi Quyet Tam, Ho Chi Minh City's deputy Party secretary, said they've already cut spending to the bone and would struggle with less money.

“We cannot make further cuts,” she said during the meeting adding that further cuts would compromise investments in infrastructure and social security, leading to dire consequences.

The city currently has around 12 million residents, including migrants. Every year, thousands of students flock here to attend university from across the country.

Tam described the proposed cuts as too abrupt for the city to handle.

Vietnam’s government has flaunted its own borrowing limits, in recent years.

Figures released in June showed a state budget deficit of more than VND260.14 trillion ($11.5 billion) in 2014—a figure equitvalent to 6.61 percent of the country’s gross domestic product that year. In 2013, the country's legislators set a 5.3 percent cap on debt, but the deficit amounted to roughly VND236.76 trillion, or 6.6 percent of GDP.

The country’s accumulated public debt is forecast to rise to 63.8 percent of GDP at the end of this year, and then 64.7 percent in 2018, according to the World Bank’s projections.

The country's legislature have capped accumulated debt at 65 percent.