Vietnam’s foreign debt leaped 6.5-fold between 2001 and 2015, with the World Bank, Japan, and the Asian Development Bank (ADB) being its largest creditors, Minister of Finance Dinh Tien Dung told the ongoing National Assembly (NA) session on May 25.
Minister of Finance Dinh Tien Dung
“Public debt is increasing rapidly, primarily because of weaknesses in managing and using loans,” he told the legislature.
Some debtors with government-guaranteed loans also lost their repayment capacity, passing on the burden to the government. He did not elaborate or name any specific State-owned enterprises (SOEs).
Debts owed to the World Bank jumped 11.5-fold in the fourteen-year period, to VND274.2 trillion ($12.08 billion) while those to the ADB and Japan rose 20.3-fold and 6.8-fold to VND151.1 trillion ($6.66 billion) and VND243.9 trillion ($10.74 billion), respectively.
Vietnam took out nearly $36.6 billion in official development assistance (ODA) and preferential loans from foreign creditors in the 2010-2016 period, while disbursing nearly $32.8 billion worth of foreign loans to finance socioeconomic development projects, Minister Dung said.
Between 2010 and 2016, the government raised VND1.27 trillion ($56.25 billion) worth of government bonds at home, representing an increase of 36 per cent each year. The government also provided guarantees totaling VND632.8 trillion ($27.87 billion) in the period while local governments also borrowed VND139 trillion ($6.12 billion).
Vietnam has depended on foreign loans to develop cash-hungry infrastructure and public projects. Hanoi, for instance, is looking to borrow a further VND53 trillion ($2.3 billion) from foreign creditors to develop its urban railway lines.
Minister Dung said the Law on Public Debt Management needs to be amended to include stricter rules on borrowing and on enhancing capital management.
Borrowings to date pushed Vietnam’s public debt to 63.7 per cent of GDP at the end of 2016, up from 62.2 per cent in 2015 and 50.1 per cent in 2011. The NA has put a curb on public debt of 65 per cent of GDP.
At end-2016, government debt and foreign debt stood at 52.6 per cent and 44.3 per cent of GDP, respectively.
The World Bank has forecast that Vietnam’s public debt will climb to 64.4 per cent this year and 64.7 per cent in 2018. The mounting debt will impose a steadily increasing burden on Vietnam’s economy and make it ever harder to cut the budget deficit, the bank said in a report released last year.
Under Vietnamese legislation, public debt includes government debt, foreign debt, government guarantees, and debts owed by local governments, while debts issued by the central bank, SOEs, and other State-run entities are excluded from the tally.
VN Economic Times
