Concern rises in Vietnam over fiscal deficit

HANOI/HONG KONG, May 20 (Reuters) – Vietnam’s state treasury has failed to raise much money through bond issues this year, sparking concerns about how Hanoi will fund a budget gap which could widen to a tenth of gross domestic product (GDP).

In an attempt to dig the country out of an economic hole that caused first quarter GDP growth to stumble to its slowest pace in a decade, the state has unveiled a string of economic stimulus measures that the government says will cost around $ 8 billion.

But the economic slowdown has staunched the flow of its main revenue sources, proceeds from crude oil exports and taxes, raising questions about how the shortfall will be met.

The government projects the 2009 budget shortfall at 8 percent of GDP, although the Asian Development Bank estimates it will be closer to 10 percent. The fiscal deficit was at 4.7 percent in 2008 and 5.5 percent in 2007.

So far this year Hanoi has sold about $ 236 million in dollar- and dong-denominated bonds, a fraction of the government’s fundraising target of 55.2 trillion dong ($ 3.11 billion).

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