The Ministry of Finance (MoF) has described public investment disbursement as falling short of expectations in 2024. As of December 31, the disbursement rate through the Vietnam State Treasury is estimated to have reached just 72.9 per cent of the plan. The key reasons behind this shortfall, according to the MoF, include unrealistic planning and budget allocation, ineffective execution, and lingering obstacles related to policies, regulations, site clearance, and investment procedures.

In response, the government has launched task forces led by Deputy Prime Ministers to directly oversee and accelerate the disbursement process. Ministries, agencies, and local authorities have also been urged to fast-track construction, streamline project acceptance procedures, and expedite final settlements to ensure progress stays on track.

Disbursement pressure

In 2025, public investment is expected to serve as the primary driver of Vietnam’s economic growth, as it marks the final year of the 2021-2025 medium-term public investment plan.

The government adjusted the public investment plan for the year in February, to approximately VND875 trillion ($35 billion); higher than the previously allocated VND790.7 trillion ($31.63 billion) and representing a 37.7 per cent increase compared to disbursement in 2024.

It also aims to raise the proportion of development investment expenditure to total State budget expenditure from 29 per cent in 2024 to 31 per cent in 2025 while reducing recurrent expenditure from 65 per cent in 2024 to below 60 per cent in 2025. If necessary, the government has proposed adjusting the State budget deficit to 4-4.5 per cent of GDP to mobilize resources for development investment. Public debt, government debt, and external debt may reach or exceed the warning threshold of around 5 per cent of GDP.

According to the MoF, the VND875 trillion in the public investment plan will be allocated to key projects such as the North-South Expressway, Long Thanh International Airport in southern Dong Nai province, and Terminal 3 at Ho Chi Minh City’s Tan Son Nhat International Airport. The government is also prioritizing infrastructure development, with comprehensive master plans for airports, seaports, railways, roads, and highways for the 2021-2030 period with a vision to 2050.

At a recent conference, Mr. Andrew Wood, Director - Asia Pacific Sovereign Ratings, at S&P Global Ratings, noted that Vietnam’s moderate government debt levels and low external borrowing risks provide ample fiscal space for infrastructure development. “Vietnam’s public debt is estimated at around 36-37 per cent of GDP in 2024, significantly lower than the 60 per cent ceiling set by the National Assembly,” he said. “This low debt level offers substantial room for medium-term fiscal stimulus packages.”

He added that measures such as increased public investment and infrastructure development will enhance national competitiveness, attract more FDI, and create positive ripple effects in industries like construction materials, logistics, and industrial parks. However, Vietnam’s cumbersome institutional framework and lack of transparency remain major obstacles to public investment efficiency.

Mr. Nguyen Hoang Linh, Head of Research at Vietcombank Fund Management (VCBF), pointed out that institutional bottlenecks are the biggest hurdle facing public investment disbursement. Disbursement has typically reached around 90 per cent of the Prime Minister’s allocated plan in recent years. “I have observed that the State Treasury’s deposits in major commercial banks reach up to VND1,000 trillion ($40 billion) at times,” he remarked. “This indicates that public investment disbursement remains largely on paper, with funds not yet flowing into the market to generate broader economic effects.”

Despite these challenges, Mr. Linh expressed optimism about public investment disbursement in 2025. “Major institutional reforms were initiated in late 2024 and are now being rapidly implemented, with the government aiming to complete the administrative restructuring within the first quarter,” he said. “Streamlining the system will free up additional resources for infrastructure investment.”

On average, government spending accounts for around 20 per cent of GDP annually, with recurrent expenditures comprising 60-70 per cent of the total State budget, equivalent to VND300-350 trillion ($12-14 billion). If recurrent spending is reduced to 10 per cent of GDP, an additional 2 per cent of GDP could be allocated to public investment. Last year, public investment accounted for approximately 5.7 per cent of GDP.

Improving investment efficiency

According to analysts’ calculations, to achieve the GDP growth target of 8 per cent set for 2025, total social investment capital must reach VND4,200 trillion ($168 billion), an increase of 14.6 per cent compared to 2024. Of this, disbursed public investment must reach VND875 trillion ($35 billion), nearly 30 per cent higher than the 2024 plan.

Experts have recalled lessons from Japan, South Korea, and China: when these countries experienced 10 per cent GDP growth, their ICOR (Incremental Capital-Output Ratio, which measures capital efficiency in relation to output growth) ranged from 3 to 4. Therefore, to achieve Vietnam’s ambitious growth target, ICOR must also be within the 2-4 range. “If the ICOR is not improved, total social investment capital may increase as expected but achieving 8 per cent growth will still be impossible,” Mr. Linh believes. “On the other hand, if the ICOR improves beyond the target, we could exceed 8 per cent growth.”

The government is making strong efforts to enhance the efficiency of infrastructure investment projects. The Prime Minister has consistently instructed ministries and local authorities to resolve delayed projects and concentrate capital on key projects to ensure their progress, as they play a critical role in driving growth across various economic sectors. In recent directives, he also tasked the MoF with intensifying inspections and audits of infrastructure investment projects and linking project progress with the specific responsibilities of individuals.

Along with these measures, experts recommend that the government direct relevant agencies to reform the allocation of public investment capital as soon as possible.

Currently, public investment allocation is primarily based on the urgent development needs of localities. However, experts suggest that the government establish evaluation criteria for public investment efficiency and management at the local level. These criteria would enable a more strategic allocation of State budgets, prioritizing localities that utilize public investment capital effectively.

Analysts have also recommended adopting a variety of assessment methods to measure the impact of public investment on economic growth. Each method has its own strengths and limitations, and no single approach can fully capture the comprehensive impact. Maximizing the use of multiple evaluation methods is therefore essential.