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Vietnamese gov’t plans to borrow $74B in 2021-23

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An intersection of the Hai Phong - Ha Noi Expressway. VNA/VNS

Vietnamese gov’t plans to borrow $74B in 2021-23

The Vietnamese government plans to borrow more than 1.7 quadrillion dong ($74 billion) in the 2021-2023 period to meet the capital demand for socio-economic development, according to the public debt management plan for the next three years approved late last week.

The borrowing aimed to ensure a balance for the state budget and promote socio-economic development at an appropriate level of cost risk. Of the sum, around 1.6 quadrillion dong would be borrowed for the central budget while 134.4 trillion dong would be for refinancing.

The plan also aimed to tightly control debt indicators to ensure budget safety and accelerating the development of the domestic capital market.

The Ministry of Finance asked the government to be active in issuing bonds, restructuring debt portfolio and developing the government bond market. In addition, the ministry must arrange resources for debt payment to prevent overdue debts which might affect the government’s international commitments.

The government would limit the issuance of new guarantees for enterprise loans with the increasing rate of the total outstanding government-backed loans not exceeding the growth rate of the Southeast Asian country’s gross domestic product (GDP).

Regarding the borrowing of local governments, the deficit level would be capped at about 0.2 per cent of GDP.

The increasing rate of short-term foreign commercial loans of enterprises and credit institutions would be controlled at less than 18-20 per cent per year and below $6.35-7 billion for medium and long term loans to ensure the country’s foreign debt within the allowable limit.

In 2021, the government would borrow more than 624.2 trillion dong, around 84 per cent of which were from domestic lenders and the rest from foreign sources.

Of the figure, 318.87 trillion dong would be spent in offsetting overspending, 260.9 trillion dong for repaying debts and 44.4 trillion dong for refinancing.

This year, the government must repay debts worth 394.5 trillion dong, equivalent to six per cent of the 2020 GDP of 6.3 quadrillion dong last year. Meanwhile, GDP growth rate was at just 2.91 per cent last year due to the impacts of Covid-19.

Local governments would have to borrow 28.79 trillion dong and pay debts worth 6.6 trillion dong, including 2.66 trillion dong in interest, this year.

The government asked the ministry to develop the public debt management plan for the 2021-2025 period, together with a public debt strategy for 2021-2030 and a project to improve the credit rating to 2025 with a vision to 2030 as well as a project to promote the application of information technology in public debt management for approval.

The focus must be placed on promoting the development of the domestic capital market and the government bond market towards diversifying products and investors with priority given to long-term investors and attracting the participation of foreign investors in the domestic debt market.

The State Bank of Vietnam must keep a close watch on foreign loans of enterprises to ensure they are within the allowable limit.

The central bank was urged to work with the ministry to develop the legal framework and tools for managing foreign debts appropriate to the economic development requirements in the context that Vietnam becomes a middle-income country.

The ratio of public debt to GDP of Vietnam decreased from 63.7 per cent in 2016 to 55.3 per cent last year, within the National Assembly’s set ceiling of 65 per cent, meaning that the pressure from public debts eased significantly during the past five years.

The budget deficit was estimated at 248.5 quadrillion dong last year, or less than four per cent of GDP. For the 2016-2020 period, budget deficit averaged 3.6 per cent of GDP.

Last year, the government issued bonds worth 333 trillion dong to offset overspending and pay debts, mostly medium and long term loans.

No bonds with terms of less than five years were issued last year. The maturity terms of government bonds issued in 2020 were 3.5 times longer than 2011, from an average of 3.9 years to 13.94 years. On average, the maturity terms of government bonds as of the end of last year averaged 8.42 years, five times longer than the end of 2011.

Besides, Vietnam did not borrow any new loans from international financial institutions such as the World Bank and the Asian Development Bank in 2020, which contributed to consolidating the credit rating of the country.

Moody's Investors Service in March affirmed the Vietnamese government’s long-term issuer and senior unsecured ratings at Ba3 and changed the outlook to positive from negative.

In April, Fitch Ratings revised Vietnam's outlook to positive from stable and affirmed the long-term foreign-currency issuer default rating at 'BB'.

S&P in May last year retained Vietnam’s sovereign credit rating at BB with a stable outlook.



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