Gov’t aims for public debt below 65% of GDP

The Government of Vietnam has targeted keeping the public debt ratio below 65% of gross domestic product (GDP) during 2016-18.

gov’t aims for public debt below 65% of gdp hinh 0

Public debt includes central government debt, Government-backed loans and local government debt.

The objective was set via a medium-term debt management programme for 2016-18 recently approved by Prime Minister Nguyen Xuan Phuc.

The programme aims to keep loans at acceptable expense and risk levels to balance the State budget and socio-economic development. It is also meant to keep the allocation and use of loans in line with their original purposes, debt indexes at safe levels, and ensure debt repayment capacity.

It sets the ceilings for the central Government’s outstanding debt at 54% of GDP and the country’s foreign debt at 50% of GDP.

Domestic and foreign debts used to make up for state budget overspending, equivalent to 5.4% of GDP in 2016, are hoped to decrease. Central budget overspending is targeted at a maximum of 3.38% of GDP in 2017 and 3.3% of GDP in 2018.

The programme stipulated that about VND606.4 trillion (US$26.69 billion) will be sourced from the central government’s loans to make up for state budget overspending from 2016 to 2018. In addition, borrowings to repay central government debts will be at VND414.4 trillion.

The National Assembly’s Resolution on a national five-year financial plan in 2016-20 issued in November 2016 also set the ceiling for public debt ratio at 65% of GDP, central government debt at 54% of GDP and foreign debt at 50% of GDP. The debt-to-GDP ceiling ratio is set at 60% for 2030.

Ministry of Finance statistics showed that public debt ratio was at 64.73% of GDP and central government debt at 53.62% at the end of 2016.

Vietnam is amending the 2009 Law on Public Debt Management aiming to control public debt and balance the State budget and socio-economic development.

Vietnam’s debt-to-GDP ratio jumped from 36.5% in 2005 to 50% in 2010 and 62.2% in 2015. During 2011-16, public debt increased 17.5% per year on average, triple the GDP growth rate. 

Cut Gov’t backed loans

Under the programme, the central government won’t provide guarantees for new domestic or external loans.

The list of programmes and projects set to receive Government guarantees will be reviewed to calculate Government-backed loan limits.

Vietnam aims to improve the efficiency of public investments and hasten public debt restructuring.

In addition, developing the domestic capital market and the Government’s bond market is necessary, as is attracting foreign investors into these markets.

VNS

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