Amend Law on Public Debt: Tie responsibility of borrowing and repaying to budget expenditures.

Public debt has created investment resources for key sectors of the economy over the years. Picture: ST.

Amend the law to overcome restrictions.

A report of the Ministry of Finance shows that, the Law on Public Debt Management has facilitated the mobilization of government loans for the State budget and for development investment. In the 5-year period (2010-2015), the number of capital mobilization was up to over 996 trillion vnd with the average growth of 41% per year. Besides, mobilizing of huge ODA capital and preferential loans from foreign donors, nearly $US 31.4 billion to increase resources for socio-economic infrastructure development, and poverty reduction. The issuance of the Government’s guarantee has contributed to supporting enterprises, banks to access domestic and foreign long-term loans both in the domestic and international markets for the implementation of key, urgent projects and programs with the total Government’s guarantee value of 568.5 trillion vnd. The Law also facilitates local authorities to mobilize around 25.8 trillion vnd per year through the issuance of bonds and re-borrowing of foreign loans by the Government.

In addition, the Law has created conditions to strengthen debt management closely, ensuring the repayment of the Government in full and timely; public debt is ensured under the safe limits.

Despite positive achievements, the implementation of the current Law on Public Debt Management faces some limitations, notably in management. Since 2001, public debt has tended to increase rapidly. In terms of scale, public debt at the end of 2015 was 2.3 times higher than 2010, 6.7 times higher than 2005 and 14.8 times higher than 2001. The average in the period 2011-2015, public debt increased by 18.4% per year. The management and allocation of loans over the times are mainly allocated for public investment projects, and programs (around 44% of the total social development investment in 2011-2015), though the Incremental capital output ratio (ICOR) in the State sector has fallen to 8.94 compared to 9.2 in the period 2006-2010, it remained higher than the general ratio of the economy (equivalent to 5.52 and 6.26), showing low efficiency in using this capital source.

Capital mobilization is also dispersed at 3 agencies: the Ministry of Planning and Investment, the State Bank, and the Ministry of Finance. The mobilization of capital is not tied tightly to the responsibility of repayment, limiting the ability to consider the effect of the loans, causing pressure and passivity in the allocation of the annual State budget expenditure.

These limitations should be resolved early on the basis of perfecting the Law on Public Debt Management and improving management and supervision in the spirit of Resolution No. 07-NQ-TU by the Politburo on the policies and solutions for the State budget restructure and public debt management to ensure a safe and sustainable national finance.

Unite head agency to manage public debt.

Speaking about the outstanding features in the draft of the Law on Public Debt Management (Amendment) of the Ministry of Finance, Mr. Vo Huu Hien, Deputy Director of the Department of Debt Management and External Finance, the Ministry of Finance says: the debt ratio is basically regulated by the current law, which includes government debt, government-guaranteed debt, and local-government debt. However, in order to define clearly, the draft amends contents of non-public debts including SOE debt repayment, debt owned by the State Bank for the implementation of monetary policy and mutual debt among levels of the budget to clarify the scope of calculation and public debt statistics.

Particular, the regulations related to the tasks and authority of agencies in public debt management, through reviewing the current regulations, some inadequacies have arisen and need to be adjusted, notably in the assignment of tasks among 3 ministries: the Ministry of Finance, the Ministry of Planning and Investment and the State Bank of Vietnam. In particular, the Ministry of Finance chairs and collaborate with related agencies in negotiation, signing framework agreements and specific agreements on ODA loans to unite public debt management function, and tie the State budget management responsibility and debt repayment under the Resolution 07. The Ministry of Planning and Investment is responsible for the State management of public investment under the Law on Public Investment. Other duties related to debt strategy, debt safety criteria, programs, plans to borrow and repay and sign framework and agreements on ODA loans, the Ministry is responsible for coordinating with the Ministry of Finance. Also, the task of preparing the content, carrying out negotiations and signing international treaties with international financial organizations represented by the State Bank of Vietnam is also proposed to be shifted to the Ministry of Finance to ensure the unification of the public debt management agency, from the stage of mobilization, use and payment of repayment.

According to Mr. Hien, in the draft, regulations on mobilizing government loans, re-lending, and guarantee conditions are improved and tightened to ensure the efficiency in the use of capital and ensure debt security in accordance with the policy of the Party and the State.

The Draft is expected to be submitted to the National Assembly for collecting comments at the meeting in May, 2017 and approval at the meeting in October, 2017.