Status quo public expenditure

26 Viet Nam-EES Paper N 32.doc Figure 4.4 summarizes the cost of four possible benefit packages. With gradual implementation, the cost for all three kinds of benefit pension for elderly not covered by the contributory pension in the “cheapest version”, working-age benefits and targeted child benefits for all poor children the “modest scenario” would peak around 2016, once fully implemented for the working-age benefit and child benefit and with the retirement age for those not covered reduced to 72 years old. The total cost of the entire package declines from the peak of around 2.33 per cent of GDP to remain stable to about 2.30 per cent of GDP until 2020. Details of the cost development of the individual benefits are displayed in Annexes 5, 6 and 7. For the old-age benefits, under scenario 1 the total additional cost to be considered would in the order of 0.6 per cent of GDP in 2020 compared to 0.8 for scenario 2 corresponding to the universal pension once the retirement age for those uncovered reaches the target age of 65, equivalent to about 2 per cent of general government expenditure compared to 2.0 per cent for scenario 2. Figure 4.5 presents the theoretical effect of the total cost on the government deficit of three possible combinations: from the most expensive combination of scenarios universal old- age pension and child benefit for all poor children in addition to working-age benefit to the most modest benefit package combining an old-age pension for the elderly not covered by the contributory scheme with a targeted child benefit limited to a maximum of two children per family, plus working-age benefit, i.e. no. 4 in figure 4.4. The graphs take into account the additional interest payments resulting from the increased deficit. As expected, under the modest benefit package the deficit in 2020, net of interest payments, would increase by at least 66 per cent in relative terms compared to the status quo scenario as a result of the additional three SPF benefits. + Total cost as a percentage of GDP Total cost as a percentage of government expenditure Viet Nam-EES Paper N 32.doc 27 Total cost as a percentage of GDP Total cost as a percentage of government expenditure ; ,. - Total cost as a percentage of GDP Total cost as a percentage of government expenditure 28 Viet Nam-EES Paper N 32.doc ; ,. - Total cost as a percentage of GDP Total cost as a percentage of government expenditure : ,, Total cost as a percentage of GDP Total cost as a percentage of government expenditure Viet Nam-EES Paper N 32.doc 29 + +