Government unable to balance budget by 2011: minister

The government will be unable to balance the budget by 2011 because of the nation's fiscal difficulties, Minister of Finance Lin Chuan (林全) said yesterday.

"If only the value-added tax [VAT] rate were raised by 1 to 2 percent, the government's goal to completely erase the deficits by 2011 would be attainable," Lin told a press conference yesterday morning.

But President Chen Shui-bian (陳水扁) has vowed not to raise taxes during his tenure. He assumed office in May 2000 and is campaigning for re-election in March.

Lin yesterday admitted that the central government's tax revenues have been on the wane for the past few years as a result of tax cuts and the economic downturn, adding that "the likelihood of meeting the government's previous goal of balancing revenues and expenditures by 2011 is slim."

OPTIMISM

According to Hsu Kuo-chung (許國忠), the ministry's statistics department chief, the government's tax revenues declined by a record high of NT$127.5 billion last year, while Lin said that the central government has been sitting on annual debts of between NT$200 billion to NT$300 billion.

Lin, however, expressed an optimistic view towards the upcoming economic recovery, saying the government's tax revenues are likely to grow so as to improve the nation's fiscal siotuation after the local economy recovers.

The minister also boasted about the ministry's progress in financial reform, in spite of the failure to pass the Financial Restructuring Fund (金融重建基金) in the current legislative session.

Lin said that the ministry has made every effort to facilitate an exit system, which will force the government to address the problem of underperforming financial institutions as quickly as possible.

Vice Finance Minister Susan Chang (張秀蓮) added that the government has adopted risk-based supervision to differentiate performance of financial institutions in accordance with financial standards such as the non-performing loan (NPL) ratio and the capital adequacy ratio (CAR).

AGGRESSIVE ACTION

For example, she said that any financial institution with an NPL ratio below 5 percent by the year's end will be rewarded with administrative convenience, while those with an NPL ratio above 5 percent will be penalized for failing to aggressively reduce their NPL ratio.

Gary Tseng (曾國烈), director-general of the Bureau of Monetary Affairs, yesterday reiterated that the government is likely to meet its 2:5:8 goal by the year's end.

According to Tseng, the nation's bad-loan ratio is nearing the 5 percent target while the nation's CAR currently averages about 10 percent.

Excluding loans under observation, the nation's NPL ratio was 5.01 percent, or NT$716.9 billion, in November, Tseng said, saying that the figure will have gone even lower last month.

However, if loans under observation are included, the bad-loan figure stands at 7.02 percent, or NT$1 trillion, as of last month.

As for the CAR, Tseng said that currently there are only six banks with CARs under the 8 percent target, including the Bank of Overseas Chinese (華僑銀行) at 5.51 percent, the Hualien Business Bank (花蓮企銀) at 5.06 percent, the Taitung Business Bank (台東企銀) at 1.59 percent and the Pan Asia Bank (泛亞銀行) at 4.87 percent, as well as two failed banks -- the Chung Shing Bank (中興銀行) and the Kaohsiung Business Bank (高雄企銀) -- that have gone bankrupt.