Closely control public debt and increase fiscal policy space

VCN- With the Government’s drastic direction, the management, borrowing and repayment of public and government debts in 2020 and 2016-2020 has many positive results, closely following public debt management targets under the National Assembly's resolutions on socio-economic development, financial plans and State budget estimates.
Take public debt ceiling increase into account to ensure goal of national financial security and stability Take public debt ceiling increase into account to ensure goal of national financial security and stability
Focus on forecasting to ensure safety of public debt in 2020 Focus on forecasting to ensure safety of public debt in 2020
2352-5638-8-3

In the photo: Prime Minister Nguyen Xuan Phuc attends the groundbreaking ceremony of the Mai Son project - National Highway 45, a sub-project of the North-South Expressway in the East (September 30, 2020). Photo: Internet.

Debt structure changespositively

According to the Government's report to the National Assembly at the 10th session, one of the outstanding results of public debt management over the past time is that debt safety ratios are strictly controlled, within the public debt ceiling approved by the National Assembly and gradually decreased over the years in 2016-2019, contributing to increasing fiscal policy space.

In 2016-2020, public debt management has been strengthened, focused and basically met the set objectives, well implemented the goal of mobilising capital with low costs associated with a reasonable risk level for investment in socio-economic development, built a synchronous infrastructure system for the national industrialisation and modernisation, ensured debt repayment ability, promoted the development of the domestic capital market; and continued to restructure public debt, ensured public debt safety and national financial security.

It is estimated that by the end of 2020, public debt will be about 56.8% of GDP; Government debt will be about 50.8% of GDP; the Government's direct debt repayment obligationto the State budget revenue ratio will be 24.1%; and the external debt will be 47.9 % of GDP; external repayment compared to export turnover of goods and services is about 34.6%. It is basically estimated that the debt-to-GDP ratios remain within the safe thresholds allowed by the National Assembly.

The debt structure has positively changed andpublic debt -to- GDP ratio decreased from 63.7% in 2016 to 55% at the end of 2019; the public debt growth rate fellfrom an average of 18.1% per year for 2011-2015 to about 6.8% eachyear for 2016-2019; the proportion of domestic debt increased from 38.9% in 2011 to 60.1% in 2016 and 61.9% of total Government outstanding loans at the end of 2019; At the same time, interest rates decreased gradually, repayment terms increased gradually and theinvestor base was expanded, contributing to reducing risk tothe Government’s debt portfolio.

For 2016-2020, the Government mobilised more than VND 1.3 million billion (an average of 260,000 billionVND/year) through the issuance of bonds to meet the demand on compensation of deficit expenditure andprincipal debt payment of the State budget, ensuring to stay within the estimate approved annually by the National Assembly.

Also in the past five years, the total value of signed ODA loans, foreign concessional loans of the Government is estimated at US$12.7 billion, of which, for 2016-9/2020, 112 loan agreements with total value US$11.9 billion were signed.

Debt repayment is also implemented in a full and timely manner, ensuring the committed obligations to the creditors. Over the years, the repayment of Government loans has been implemented in a strict and timely fashion, including the direct debt obligations of the Government and the re-lending obligations, preventing the overdue debts that affect commitments to investors.

Speaking at the 10th session of the 14th tenure of the National Assembly, Minister of Finance Dinh Tien Dung said the deficit spending in 2020 is estimated to increase to 5.59% of GDP (calculated according to the new GDP). Public debt increased to 57.4% of GDP, below the ceiling approved by the National Assembly (65%).

Considering from the record of 63.7% of GDP in 2016, this is also a positive result. This result is thanks to the efforts and accumulation of recent years, creating space for management, while still ensuring spending on investment and social security.

With the results of this year, the average five-year deficit spending was 3.8%, reaching the target of less than 3.9% of the five-year plan. Although in 2020 there has been a reduction of revenue and increase of the deficit spending due to the negative impact of the Covid-19 pandemic, the Minister of Finance said the fiscal and budget situation is still a bright spot.

Improving the country's reputation

The Minister of Finance also reported to the National Assembly that the quality of public debt increased compared to the period 2013 - 2015. With great efforts to restructure the debt portfolio over the years, the term of the Government bond portfolio is over eightyears (the previous period was only 2.9 years). This year, the Ministry of Finance has managed to borrow more than VND 200,000 billion to repay principal and follow disbursement progress instead of planned borrowing.

The more than13-year term with the interest rate of only 2.9% is lower than the concessional interest rate and not affected by exchange rate. This loan amount is also a good condition to negotiate a more profitable international loan. From 2016 to now, the interest rate level has decreased from about 6.5-8% peryear for terms from fiveto 30 years to about 1.5-3.5 % peryear, of which 10-year to 30-year term has the lowest interest rate. Compared with other countries in the region and nationswith the same credit rating,Vietnam's bond issuance interest rate is lower than from 1-2 percentage points .

The average external debt interest rate of the Government remains at a low level (1.8% per year) because nearly 98% of foreign loans have ODA and preferential conditions; 25-year average loan term, seven-year average grace period, meeting requirements for long-term loans for development investment.

This factor has made an important contribution to maintaining the debt repayment target ofthe State budget revenue within the safe range in the past period and is seenpositively by the International Monetary Fund and credit rating agencies when analysing sustainability of Vietnam’s external debt portfolio.

Vietnam's credit rating can also be considered a positive point. Vietnam's national credit rating has been improved in 2016-2020. This has contributed to improving the nation's reputation, increasing confidence in international investors. The cost of mobilising foreign capital forboth the Government and enterprises will be reduced. This plays an important role when ODA and concessional loans for Vietnam are decreasing and coming to an end.

In 2020, thoughthe world and the country have faced challenges, a bright spot from the beginning of the year to date is that Vietnam's national credit rating remains under assessment by three credit rating organisations.

In the first nine months of the year, S&P, Moody's and Fitch provided 99 downgrades and 117 ratings adjusted to negative outlooks for 42 countries around the world, mainly due to fiscal support packages for pandemic prevention, leading to a sharp increase in public debt in these countries.

To retain Vietnam's credit rating, first of all, it is the great effort of the Government in effectively controlling pandemic, thereby confirming the strong restoration of Vietnam’s economy in the post-pandemic.

In addition, it must be mentioned the important contribution of the achievement of consolidating financial and budget situation since the beginning of the term up to now, sharply reducing the deficit and public debt ratio, creating a fiscal policy spaceto cope with macro risks that the economy is facing in 2020.

By Hong Van/Ngoc Loan

Related News

Strictly control public debt and ensure national financial security  2025

Strictly control public debt and ensure national financial security 2025

VCN – In order to achieve goal of strictly managing public debt and maintaining security and safety of the national financial system in 2025, it is necessary to ensure the borrowings and repayments of public debts is within the approved estimate; closely monitor public debt indicators to ensure that they are within the ceiling and warning thresholds approved by the National Assembly.
Ensuring national public debt safety in 2024

Ensuring national public debt safety in 2024

VCN - Since the beginning of the year, public debt management has been conducted proactively and effectively, meeting the need of raising capital for development investment. At the same time, debt indicators by the end of 2024 are guaranteed within the ceiling and safety threshold approved by the National Assembly, ensuring national financial security, increasing proactive response to risks arising from external and internal causes of the economy.
An Giang Customs announces businesses with tax arrears

An Giang Customs announces businesses with tax arrears

VCN - An Giang Customs Department has just announced 25 businesses with tax arrears worth over VND6.2 billion.
Increasing institutional investors – improving quality of corporate bond market

Increasing institutional investors – improving quality of corporate bond market

VCN - The structure and quality of investors have been one of the limitations of the corporate bond market in recent times. To improve the quality of the market, increasing institutional investors and improving the quality of investors, including individual investors, is one of the solutions that have been implemented by management agencies, thereby building a sustainable corporate bond market.

Latest News

Việt Nam

Việt Nam's stock market recovers but outlook remains uncertain

Following a prolonged period of volatility, the VN-Index is approaching a critical resistance level, raising the question of whether the market has enough momentum to break through or if it is merely undergoing a technical rebound before further corrections.
Bad debt at banks continues to rise in both amount and ratio

Bad debt at banks continues to rise in both amount and ratio

VCN - After nine months of 2024, bad debt balances at banks continue to rise, potentially posing risks to the banking sector if control measures aren't implemented.
Monetary policy forecast unlikely to loosen further

Monetary policy forecast unlikely to loosen further

It will be difficult for the State Bank of Vietnam (SBV) to further loosen monetary policy due to a rising USD/VNĐ exchange rate pressure, experts said.
Green credit proportion remains low due to lack of specific evaluation criteria

Green credit proportion remains low due to lack of specific evaluation criteria

VCN - According to the State Bank of Vietnam (SBV), as of the end of September 2024, 50 credit institutions had outstanding green credit balances exceeding VND 665 trillion, accounting for over 4.5% of the total outstanding loans in the economy.

More News

Launching virtual assistants to support taxpayers

Launching virtual assistants to support taxpayers

VCN – After completing the research and development of the artificial intelligence product “Virtual assistants to support taxpayers”, on November 21, Hanoi Tax Department was selected by the General Department of Taxation as the pilot unit to support taxpayers.
Banks increase non-interest revenue

Banks increase non-interest revenue

VCN - Slow credit demand and fierce competition have forced banks to seek ways to increase non-interest revenue, especially when there is a lot of support from the digital transformation of the entire banking system.
Monetary policy forecast unlikely to loosen further

Monetary policy forecast unlikely to loosen further

It will be difficult for the State Bank of Vietnam (SBV) to further loosen monetary policy due to a rising USD/VNĐ exchange rate pressure, experts said.
World Bank outlines path for Vietnam to reach high income status

World Bank outlines path for Vietnam to reach high income status

The World Bank (WB) has released a report which explores how Vietnam can upgrade its participation in global value chains to become a high-income country by 2045.
Revising the title of a draft of 1 Law amending seven finance-related laws

Revising the title of a draft of 1 Law amending seven finance-related laws

VCN - On November 19, 2024, the Standing Committee of the National Assembly (SCNA) discussed amendments and refinements to the draft of a law revising seven existing finance-related laws. Concluding the session, Vice Chairman of the National Assembly Nguyen Duc Hai emphasized the need for the Government to direct the drafting body and relevant agencies to collaborate closely to finalize a persuasive and widely supported report, ensuring the quality of the draft law for the National Assembly's consideration and decision.
Transparency evates the standing of listed companies

Transparency evates the standing of listed companies

VCN - According to the Hanoi Stock Exchange (HNX), the number of companies placed under warning, control, or restricted trading on the listed and registered markets has increased over the past two years compared to 2022.
State-owned securities company trails competitors

State-owned securities company trails competitors

Contrary to the outstanding performances in the banking sector, the securities subsidiaries of major banks have yet to fully leverage their potential, despite numerous inherent advantages.
Strengthening the financial “health” of state-owned enterprises

Strengthening the financial “health” of state-owned enterprises

VCN - The state economy plays a key role in the socio-economic development process, but it is necessary to strengthen the financial health and competitiveness of state-owned enterprises (SOEs).
U.S. Treasury continues to affirm Vietnam does not manipulate currency

U.S. Treasury continues to affirm Vietnam does not manipulate currency

VCN - In its latest report, the U.S. Department of the Treasury has positively assessed Vietnam's monetary policy, reaffirming that Vietnam does not engage in currency manipulation.
Read More

Your care

Latest Most read
Việt Nam

Việt Nam's stock market recovers but outlook remains uncertain

Following a prolonged period of volatility, the VN-Index is approaching a critical resistance level, raising the question of whether the market has enough momentum to break through or if it is merely undergoing a technical rebound before further corrections.
Bad debt at banks continues to rise in both amount and ratio

Bad debt at banks continues to rise in both amount and ratio

After nine months of 2024, bad debt balances at banks continue to rise, potentially posing risks to the banking sector if control measures aren't implemented.
Monetary policy forecast unlikely to loosen further

Monetary policy forecast unlikely to loosen further

It will be difficult for the State Bank of Vietnam (SBV) to further loosen monetary policy due to a rising USD/VNĐ exchange rate pressure, experts said.
Green credit proportion remains low due to lack of specific evaluation criteria

Green credit proportion remains low due to lack of specific evaluation criteria

As of the end of September 2024, 50 credit institutions had outstanding green credit balances exceeding VND 665 trillion, accounting for over 4.5% of the total outstanding loans in the economy.
Launching virtual assistants to support taxpayers

Launching virtual assistants to support taxpayers

VCN - According to the Hanoi Tax Department, the department manages 236,000 enterprises and 235,000 business households and over 10 million personal tax codes.
Mobile Version