Loan balance must ensure solvency of local governments

Loan balance of VND 926 trillion affected by Covid-19 epidemic

Regulation on loan balance of local government budget is mainly based on the balance of the financial resources of each local group. Photo: Internet.

Voters of Bac Kan province sent a proposal to the Ministry of Finance that as per Point c, Clause 6, Article 7 of the State Budget Law 2015, the total loan balance must not exceed 20% of the retained revenue amount. According to this regulation, provinces with low revenue will face difficulties in using and mobilizing ODA capital sources.

Accordingly, the voters proposed the Ministry of Finance to advise the Government to submit to the National Assembly to amend the above regulation in the direction of increasing the loan balance from 20% to 50% of the retained revenue amount for localities that have low local revenues to create momentum for development.

Responding to voters' petitions, the Ministry of Finance cited the regulations in Clause 6, Article 7 of the 2015 Law on State Budget about the loan balance of the local government budgets. Accordingly, the loan balance of budgets of Hanoi and HCM City must not exceed 60% of the local government budget revenue they may retain.

In the localities permitted to retain an amount of revenue higher than the recurrent expenditure of the local government budgets, the loan balance must not exceed 30% of the amount retained.

In the localities permitted to retain an amount of revenue not exceeding recurrent expenditure of the local government budgets, the loan balance must not exceed 20% of the amount retained.

According to the Ministry, the regulation on loan balance of local government budget is mainly based on the balance of the financial resources of each local group to ensure their solvency, contributing to controlling the level of public debt, government debt, and external debt of the country, and ensuring macroeconomic stability and safety and sustainability of public debt.

For localities with difficulties and low revenue, budget expenditure is mainly from the central budget balance (such as Bac Kan province, the province’s revenue in 2022 only met 15% of the local budget balance), so the loan balance of the local budget must not exceed 20% of the retained revenue amount.

Therefore, the Ministry of Finance requested the province to comply with the provisions of the State Budget Law. The Ministry has also recorded voters' proposals and will submit them to competent authorities in amending and supplementing the State Budget Law to be consistent with the actual situation.