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Capital mobilization from Government bonds to attach with public investment disbursement

16:33 | 14/11/2022

VCN – The State Treasury will closely monitor the disbursement progress to issue a corresponding volume of Government bonds to ensure loan capital, meet capital use demand, and improve the efficiency of capital use and mobilization.

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In the first ten months of 2022, total volume of issued bonds is valued at VND139,432 billion. Photo: Internet
In the first ten months of 2022, total volume of issued bonds is valued at VND139,432 billion. Photo: Internet

Mobilizing VND24,650 billion from Government bonds

By implementing solutions to stabilize and develop the Government bond market, the State Treasury has issued and made Government bonds an attractive investment channel, reducing loan charges of the State budget by continuously renewing bond issuance, diversifying terms and extending the average loan term, thereby contributing to restructuring the State budget in accordance with the Government’s policy.

The State Treasury has also actively and flexibly managed the Government bond portfolio in association with State fund management. The Government bond has become a main and effective medium-term and long-term capital mobilization channel of the State budget, meeting spending needs for national important projects and contributing to the country’s economic growth.

In 2022, the State Treasury estimated to mobilize VND400 trillion from Government bonds. However, during the implementation, the volume and bond term will be adjusted to comply with the market and capital needs of the State budget.

In October 2022, the State Treasury organized five Government bond auction sessions and raised VND 24,650 billion. Accumulated in the first ten months of 2022, the total volume of issued bonds is valued at VND139,432 billion, reaching approximately 35% of the assigned annual plan.

Specifically, the average issuance term is 13.42 years; the remaining term of the portfolio is 9,10 years and the average issuance interest rate is 2.83%/year.

The State Treasury said that the central budget revenue is quite good while the disbursement of public investment capital from the central budget is still low, leading to the state budget balance at a high level. Based on budget collection results, disbursement progress and financial and monetary market situation, the State Treasury organized capital mobilization from Government bonds mainly to meet the demand for principal repayment of the central budget and maintain regular movements of the Government bond market in line with the spending needs of the central budget and ensuring efficiency of capital use and mobilization.

According to the State Treasury, the issuance interest rate and related expenses for the issuance, payment of principal and interest of Government bonds have continuously decreased in recent years, which has saved the state budget's borrowing costs not only in the year of issuance but also in the remaining years of the government bond's life. With the current issuance term of government bonds from 5 years to 30 years, the decrease in borrowing costs is meaningful in restructuring the State budget.

Closely monitoring disbursement progress

It is expected that the financial and monetary market situation in the world and in the country will still be volatile, and some central banks around the world will continue to raise the basic interest rate to control inflation. Specifically, the Fed will increase interest rates from now until the end of 2022; the European Union and countries such as Australia, Canada, and South Korea announced to use all measures to reduce the inflation rate, including tightening monetary policy through raising interest rates.

In addition, in the context that the state budget revenue in 2022 is expected to be quite good and is likely to exceed the estimate assigned by the National Assembly, the State Treasury will closely monitor the disbursement progress and increase the issuance of government bonds when the public investment disbursement progress is promoted, ensuring loans and meeting the capital needs and improving the efficiency of capital mobilization and use.

Furthermore, following policies of the Party, the National Assembly and the Government on strengthening the mobilization, management, allocation and effective use of financial resources, the State Treasury proposed the Ministry of Finance submit to competent authorities to allow the maximum use of other legal financial sources such as additional revenue from spending savings, temporarily idle state funds to reduce overspending in 2022 and reduce government bond loans, and stabilize the market in the context that the domestic financial and monetary market have complicated and unpredictable developments.

The State Treasury mobilizes about VND45 trillion of government bonds The State Treasury mobilizes about VND45 trillion of government bonds

According to forecasts of some economic experts, if public investment projects can accelerate capital disbursement in the rest of this year, the Government may enhance the issuance of government bonds. However, it is likely that the plan to raise VND400 trillion through the issuance of government bonds set out at the beginning of the year will have to be adjusted, because it is forecast that the disbursement progress of public investment capital is difficult to achieve the target.

In the condition that the government bond market interest rates are still volatile and the demand to buy government bonds from investors, especially commercial banks, is very low, to mobilize capital in the fourth quarter of 2022 from the Government bond issuance, the State Treasury has reported to the Ministry of Finance on the possibility of issuing government bonds in the remaining months of 2022. In which, it is proposed to mobilize about VND 100,000 billion in the fourth quarter of 2022; about VND 215,000 billion for the whole year; increase interest rate of government bonds equivalent to the interest rate traded on the market.

By Thuy Linh/ Huyen Trang