Vietnam's GDP growth cannot keep pace with increasing public debt

Vietnam is still under big pressure to call for capital for domestic debt swap, with 50% of domestic debts expected to reach maturity in the next three years, according to the World Bank.

The report on public debt implemented by the government of Vietnam in cooperation with WB showed that the ratio of public debt on GDP is rising, and that Vietnam is one of the countries with the fastest growing ratio, which has increased by 10% in the last five years.

Dinh Trong Thinh, a renowned economist, said if the Vietnam economy grows well, it will be able to pay debts. However, there are problems in current economic growth.  

Vietnam is trying to increase investments to obtain growth. With the current growth model, the economy cannot develop in a sustainable way.

vietnam's gdp growth cannot keep pace with increasing public debt hinh 0

He went on to say that Vietnam’s public debt and foreign debt are beyond the safety line. If the situation cannot be improved, it will be a problem for the national economy and Vietnam will have to pay a heavy price.

“Loosening expenditures, in the long term, is the cause of the budget deficit. If so, the government has to to borrow money for spending which will lead to an increase in public debt in general and foreign debt in particular, and insolvency,” he warned.

Thinh has suggested five solutions to improve the debt payment capability.

First, Vietnam needs to change the investment and production development model and apply the model which utilizes science and technology to create high productivity. Second, the country needs to carry out administration reform, and cut out waste in the state apparatus.

Third, Vietnam needs to be more selective in attracting FDI, so that the foreign invested economic sector has good effects on other economic sectors and the economy. 

Fourth, it is necessary to heighten the operational efficiency of SOEs. Reforming the management mechanism at SOEs (state-owned enterprises) is a difficult task, but it is a must.

Fifth, Vietnam will consider borrowing money to pay debts, but it needs to be cautious to be sure that the debt structure is within the safety line.

Pham Quy Tho from the Institute for Policy and Development commented that the public debt growth rate in the last three to four years is 3-4 times higher than the GDP growth rate.

He stressed that the settlement of debt must be must be clarified in law to heighten enforcement. 

Some analysts have suggested raising the public debt ceiling to be able to call for capital for investment and development. However, Deputy PM Vuong Dinh Hue said the government has said ‘no’ to the ceiling lifting.


Related news