Enhance financial management capacity to effectively control public debt

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Mr. Rodrigo Cabral

Currently, the World Bank and the Ministry of Finance have continuously implemented the GDRM program phase 2. One of contents of this program is the development of reform framework in public debt management. Could you tell me how this reform framework affects the public debt management in Vietnam?

WB is pleased in supporting the Ministry of Finance as well as Vietnam to develop the long-term roadmap on the reform of public debt management in a effective, transparent and appropriate manner. Our goal is to provide a long-term vision for Vietnam's debt management in accordance with international practices.

With such a vision in the coordination framework, we cooperate with Vietnam’s Government and the Ministry of Finance to develop roadmaps with specific results in the different fields on public debt management to effectively achieve that goal. For example, how to manage public debt, how to manage Government debt, how to manage local government debt …. For each debt, we will provide a specific roadmap and steps for the short and long term, in the 3 and 5 following years.

One more thing, I also shared that Vietnam is shifting from a country borrowing ODA loans into the country accessing marketable loans. Therefore, Vietnam should enhance capacity to continuously manage public debts and effectively mobilize public loans. As a partner of the Ministry of Finance and a tripartite partner among the Ministry of Finance – WB and other donors, we desire to continuously support Vietnam in enhancing the public debt management capacity in this period.

As you have shared, the current period is very important in managing public debt in Vietnam, because Vietnam is shifting from borrowing ODA loans into accessing marketable loans. Thus, in this shifting, what risks will Vietnam face, Sir?

Many countries as well as Vietnam in this period face many difficulties due to the need to further access less preferential loans and marketable loans. There are major challenges, but the most important thing is the enhancement of financial management capacity, market access capacity, market understanding and development of domestic capital market, as well as accessibility to international capital markets to meet the needs of the Government.

As a global institution, the World Bank has experience in many countries, therefore, in the coordination framework with the Ministry of Finance , we will assist Vietnam to implement the shifting period stably and achieve the Government’s goal on public debt management.

Currently, in Vietnam, in the debt structure of the Government, the proportion of outstanding domestic debt accounted for about 60% and foreign debt about 40%. In your opinion what is the "good" rate for Vietnam in this shifting?

In fact, it is hard to say which rate is the "good" rate because it depends on the specific situation of each country. As in Vietnam, the current orientation is very appropriate which is the shifting from the dependence of many foreign loans into domestic loans. Different countries have different rates and strategies. To determine this rate, it must take characteristics of the debts into account.

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In Vietnam, for instance, most of loans are long-term loans of international financial institutions, with preferential conditions, long term and with low interest rates, it is clear that Vietnam has an advantage in managing the risk of exchange rate as well as the risk of foreign loans. But in many countries, when they want to reduce foreign loans quickly and focus on domestic loans, it will resolve the exchange rate risk but faces the risk of pressure from loan repayment. Therefore, the rate should be based on the characteristics of each country.

Thank you, Sir!