Vietnam should reduce the level of debt it owes to foreign lenders andincrease domestic debt in order to avoid foreign exchange rate-relatedrisks, said the vice chairman of the National Financial SupervisoryCommittee, Le Xuan Nghia.
"In each industry and locality, we need to clearly calculate how muchinvestment we can mobilise from the State budget and other domesticsources, and how much we need to borrow from foreigners," agreed DangVan Thanh of the National Assembly's Economic and Budget Committee.
Thanh also urged the development of a system for better monitoring and evaluating public debt.
The nation's foreign debt is overwhelmingly held by the Japanese,making the debt susceptible to foreign exchange rate risks, said CentralInstitute for Economic Management deputy director Vo Tri Thanh, notinglarge fluctuating range of the Japanese yen.
Japanheld nearly 42 percent of Vietnam's total foreign debt at the end of2009, followed by Singapore at 27 percent. Although the US dollar is thekey trading currency, it accounts for only 16.6 percent of Vietnam'sdebt currency structure.
Foreign debt was equal to39 percent of the nation's gross domestic product (GDP) at the end of2009, and a new Ministry of Finance report has estimated that this wouldreach 44.6 percent this year – very close to its set maximum thresholdof 50 percent.
However, Goverment and foreign debtindicators are currently within safe zones, reassured the head of thefinance ministry's public debt management and foreign financedepartment, Nguyen Thanh Do.
Official developmentassistance – often given in the form of loans with favorable interestrates – accounted for nearly 75 percent of the Government's foreign debtstructure, Do noted.
The average interest rate forall government loans in 2010 was 2.1 percent, according to ministrycomputations made at the end of 2009.
Nghia said thekey factor in managing foreign debt was the maintenance and improvementof sovereign credit worthiness – an index that reflects nationalfinancial prestige.
"If we manage debtineffectively, reducing national credibility, the consequences would bemultiplied because creditors would turn their back to us," he said.
"Even the long-term loans are in risk then."
The secured debt threshold varied among countries depending on variousfactors, including national financial prestige, foreign currencyreserves and the Incremental Capital Output Ratio (ICOR) Index, Doadded.
Detailed information on the national debt anddebt repayment will be periodically made public, under a new decreeissued this month and taking effect on August 30.
The new decree sets out secured indicators in managing public debt,including domestic and foreign debt as a proportion of GDP and debtburdens in comparison with trade revenues.
Thedecree requires the development of a long-term strategy to includebetter assessment and management in the period before loans are taken.The national socio-economic development strategy would serve as the keybasis for working out public debt strategy, along with industrial andregional development plans and Government guidelines on capital sourcesand loan usage.
A three-year public debt managementprogramme to guarantee secured debt-related indicators and ensure thatdebt management follows Government guidelines will also be established,along with the formulation of a detailed annual borrowing and repaymentplan that includes domestic and foreign loan structures and interest.
The decree is one of several documents promulgatedunder the new Law on Management of the Public Debt, which was issuedlast year and took effect this year, along with a decree onGovernment-underwritten debt and a decree on Government and municipalbond issues./.
"In each industry and locality, we need to clearly calculate how muchinvestment we can mobilise from the State budget and other domesticsources, and how much we need to borrow from foreigners," agreed DangVan Thanh of the National Assembly's Economic and Budget Committee.
Thanh also urged the development of a system for better monitoring and evaluating public debt.
The nation's foreign debt is overwhelmingly held by the Japanese,making the debt susceptible to foreign exchange rate risks, said CentralInstitute for Economic Management deputy director Vo Tri Thanh, notinglarge fluctuating range of the Japanese yen.
Japanheld nearly 42 percent of Vietnam's total foreign debt at the end of2009, followed by Singapore at 27 percent. Although the US dollar is thekey trading currency, it accounts for only 16.6 percent of Vietnam'sdebt currency structure.
Foreign debt was equal to39 percent of the nation's gross domestic product (GDP) at the end of2009, and a new Ministry of Finance report has estimated that this wouldreach 44.6 percent this year – very close to its set maximum thresholdof 50 percent.
However, Goverment and foreign debtindicators are currently within safe zones, reassured the head of thefinance ministry's public debt management and foreign financedepartment, Nguyen Thanh Do.
Official developmentassistance – often given in the form of loans with favorable interestrates – accounted for nearly 75 percent of the Government's foreign debtstructure, Do noted.
The average interest rate forall government loans in 2010 was 2.1 percent, according to ministrycomputations made at the end of 2009.
Nghia said thekey factor in managing foreign debt was the maintenance and improvementof sovereign credit worthiness – an index that reflects nationalfinancial prestige.
"If we manage debtineffectively, reducing national credibility, the consequences would bemultiplied because creditors would turn their back to us," he said.
"Even the long-term loans are in risk then."
The secured debt threshold varied among countries depending on variousfactors, including national financial prestige, foreign currencyreserves and the Incremental Capital Output Ratio (ICOR) Index, Doadded.
Detailed information on the national debt anddebt repayment will be periodically made public, under a new decreeissued this month and taking effect on August 30.
The new decree sets out secured indicators in managing public debt,including domestic and foreign debt as a proportion of GDP and debtburdens in comparison with trade revenues.
Thedecree requires the development of a long-term strategy to includebetter assessment and management in the period before loans are taken.The national socio-economic development strategy would serve as the keybasis for working out public debt strategy, along with industrial andregional development plans and Government guidelines on capital sourcesand loan usage.
A three-year public debt managementprogramme to guarantee secured debt-related indicators and ensure thatdebt management follows Government guidelines will also be established,along with the formulation of a detailed annual borrowing and repaymentplan that includes domestic and foreign loan structures and interest.
The decree is one of several documents promulgatedunder the new Law on Management of the Public Debt, which was issuedlast year and took effect this year, along with a decree onGovernment-underwritten debt and a decree on Government and municipalbond issues./.
