The seminar on risk management of on-lending foreign loans and government guarantees takes place on November 19-20. (Photo: VietnamPlus).
Hanoi (VNA) – The debt management in Vietnam requires reforms to meet the requirements of management amid radical changes in development of the country and gradually move closer to international practices.
The Ministry of Finance (MoF)’s Department of Debt Management and External Finance held a seminar on November 19 and 20 to discuss risk management of on-lending foreign loans and government guarantees.
Participants stressed that credit risk management is one of the five pillars that need to be immediately implemented in 2020-2021 in the integrated debt management reform framework built by Vietnam in coordination with the World Bank (WB), the International Monetary Fund (IMF) and sponsors, which is financially supported by the Swiss State Secretariat for Economic Affairs (SECO).
Debt management strengthened
According to Director of the MoF’s Department of Debt Management and External Finance Truong Hung Long, since the Vietnamese National Assembly (NA) adopted the Law on Public Debt Management in 2017, the country's legal documents on public debt management have been basically completed.
Vietnam has paid special attention to public debt management, achieving important results in the work.
Regarding policies, Vietnam has consistently followed the goal of fiscal strengthening with public debt safety criteria under control, contributing to offsetting fiscal policy to effectively cope with macro shocks like Vietnam has been facing this year, Long said.
In the near future, Vietnam is expected to face rising macro-economic risks such as stalled economic growth, higher interest rates and rising costs due to population aging, he noted.
Meanwhile, foreign sponsors gradually adjusted development cooperation policies with Vietnam by shifting from the supply of official development assistance (ODA) to loans with less preferential rates. Capital mobilization costs of some loans doubled compared to the previous period, increasing the Government's external debt repayment obligations.
Limiting provision of government guarantees
In the next five years, the provision of ODA loans will gradually decrease, eventually ending, leading to a shortage of long-term loans and investment incentives, Long said.
The government needs to mobilize new loans with less preferential rates to compensate for the shortfall in budget balance, medium-term public investment, as well as on-lending to localities, enterprises and public non-productive units, he said.
Vietnam will continue to implement a policy of restricting the provision of government guarantees for new loans in the coming time, the official stressed.
Government guarantees still play a very important role in helping corporations and enterprises implement national key projects which are able to access to large-scale commercial capital with more preferential rates.
Long emphasised the need to have a reasonable debt structure and a balance between costs and risks, between direct debt obligations and the government's contingent debt obligations in accordance with development requirements and management capacity of Vietnam.
He stressed that enhancing capacity of debt management officers, especially in grasping credit risk measures and applying quantitative model to offer advice in the field is the top priority towards sustainably ensuring debts for the mid and long-terms.
At the seminar, IMF experts mentioned risk management-related methodology in government guarantees and on-lending, and shared experience in developing a credit risk management framework and credit risk assessment method.
Sandeep Saxena, an expert from the IMF’s Fiscal Affairs Department, pointed out that guarantees and loans have similar risks that are shown in different forms, so they need to be managed appropriately.
The MoF can benefit from building the capacity to evaluate guarantees/on-lending proposals, and evaluate and quantify the risks associated with guarantees/on-lending at the time of issuance, thus improving the effectiveness of record tracking and information disclosure, promoting the transparency, and facilitating related management, Saxena said.
Participants to the seminar focused on multidimensional discussion, providing valuable information and experience to help Vietnamese agencies in applying in their management activities./.
