An intersection of the Hai Phong - Hanoi Expressway. Vietnam has approved the public debt management plan for the next three years to ensure capital demand for socio-economic development. (Photo: VNA) Theborrowing aimed to ensure a balance for the State budget and promotesocio-economic development at an appropriate level of cost risk. Of the sum,around 1.6 quadrillion VND would be borrowed for the central budget while 134.4trillion VND would be for refinancing.
Theplan also aimed to tightly control debt indicators to ensure budget safety andaccelerating the development of the domestic capital market.
TheMinistry of Finance asked the Government to be active in issuing bonds,restructuring debt portfolio and developing the Government bond market. Inaddition, the ministry must arrange resources for debt payment to preventoverdue debts which might affect the Government’s international commitments.
TheGovernment would limit the issuance of new guarantees for enterprise loans withthe increasing rate of the total outstanding Government-backed loans notexceeding the growth rate of the country’s gross domestic product (GDP).
Regardingthe borrowing of local governments, the deficit level would be capped at about0.2 percent of GDP.
Theincreasing rate of short-term foreign commercial loans of enterprises andcredit institutions would be controlled at less than 18-20 percent per year andbelow 6.35-7 billion USD for medium and long term loans to ensure the country’sforeign debt within the allowable limit.
In2021, the Government would borrow more than 624.2 trillion VND, around 84 percentof which were from domestic lenders and the rest from foreign sources.
Ofthe figure, 318.87 trillion VND would be spent in offsetting overspending, 260.9trillion VND for repaying debts and 44.4 trillion VND for refinancing.
Thisyear, the Government must repay debts worth 394.5 trillion VND. Compared to GDPwhich was worth 6.3 quadrillion VND in 2020, the amount of debt theGovernment must repay this year was equivalent to 6 percent. Meanwhile, GDPgrowth rate was at just 2.91 percent last year due to the impacts of COVID-19.
Localadministrations would have to borrow 28.79 trillion VND and pay debts worth 6.6trillion VND, including 2.66 trillion VND in interest, this year.
TheGovernment asked the Ministry of Finance to develop the public debt managementplan for the 2021-2025 period, together with a public debt strategyfor 2021-30 and a project to improve the credit rating to 2025 with avision to 2030 as well as a project to promote the application of informationtechnology in public debt management for approval.
Thefocus must be placed on promoting the development of the domestic capitalmarket and the Government bond market towards diversifying products andinvestors with priority given to long-term investors and attracting theparticipation of foreign investors in the domestic debt market.
TheState Bank of Vietnam must keep a close watch on foreign loans of enterprisesto ensure they are within the allowable limit.
Thecentral bank was urged to work with the Ministry of Finance to develop thelegal framework and tools for managing foreign debts appropriate to theeconomic development requirements in the context that Vietnam becomes amiddle-income country.
Theratio of public debt to GDP of Vietnam decreased from 63.7 percent in 2016 to55.3 percent in 2020, within the National Assembly’s set ceiling of 65 percent,meaning that the pressure from public debts eased significantly during the pastfive years.
Thebudget deficit was estimated at 248.5 quadrillion VND in 2020, or less thanfour percent of GDP. For the 2016-2020 period, budget deficit averaged 3.6 percentof GDP.
In2020, the Government issued bonds worth 333 trillion VND to offset overspendingand pay debts, mostly medium and long term loans.
Nobonds with terms of less than five years were issued last year. The maturityterms of Government bonds issued in 2020 were 3.5 times longer than 2011, froman average of 3.9 years to 13.94 years. On average, the maturity terms ofGovernment bonds as of the end of 2020 averaged 8.42 years, five times longerthan the end of 2011.
Besides,Vietnam did not borrow any new loans from international financial institutionssuch as the World Bank and the Asian Development Bank in 2020, whichcontributed to consolidating the credit rating of Vietnam.
Moody's InvestorsService in March affirmed the Vietnamese Government’s long-term issuer andsenior unsecured ratings at Ba3 and changed the outlook to positivefrom negative.
InApril, Fitch Ratings revised Vietnam's outlook to positive fromstable and affirmed the long-term foreign-currency issuerdefault rating at 'BB'.
S&Pin May 2020 retained Vietnam’s sovereign credit rating at BB with a stableoutlook./.
VNA
