Vietnam’s National Assembly has greenlit a supplemental budget of 44 trillion dong (approximately US$1.7 billion) to finance layoffs in a sweeping effort to streamline the public sector. The landmark decision, passed almost unanimously with 436 out of 438 votes on May 17, marks a bold shift in Vietnam’s fiscal strategy—focusing on cost-cutting rather than ramping up taxes.
According to Tuoi Tre newspaper, the funds will support compensation and benefits for state workers, officials, and civil servants affected by the government’s restructuring efforts. The policy is a part of Vietnam’s broader plan to reduce the public sector workforce by 20 percent across all levels of government, with the savings redirected toward free education and other social priorities.
Earlier this year, the government took its first major step by slashing the number of ministries from 18 to 14, while retaining three other cabinet-level bodies: the Government Office, the Government Inspectorate, and the State Bank of Vietnam. Vietnam currently maintains seven deputy ministers, in line with its leaner approach to governance.
Vietnam’s fiscal philosophy contrasts starkly with that of Sri Lanka, which has leaned into revenue-based fiscal consolidation. Post-debt default, Sri Lanka has significantly raised taxes, expanded its public sector, and seen public salaries consume over 80 percent of tax revenue. The country’s reliance on revenue-side adjustments has stirred criticism, especially as public spending rose from around 17 percent of GDP in 2015 to nearly 20 percent by the time of its economic collapse.
Meanwhile, Vietnam continues to uphold a pro-growth, low-tax model. Corporate income tax stands at 20 percent and VAT at 10 percent, while the government maintains tight control over expenditure.
With this latest move, Vietnam signals its commitment to fiscal prudence, prioritizing structural reform over short-term revenue gains—marking a clear divergence from the paths taken by other crisis-hit economies.