Ensuring national public debt safety in 2024

	Vietnam’s public debt management on right track: Ministry
	Good management of public debt creates room to implement expansionary fiscal policy
	Managing fiscal policy has achieved many positive and comprehensive results

Vietnam terminates ODA loans with highly preferential conditions and switched to loans under market conditions. Illustration: ST

Debt indicators are within the ceiling and safety threshold

Based on the estimated implementation of borrowing, repayment of public debt and foreign debt of the country in 2024, it is expected that debt indicators by the end of 2024 will be within the ceiling and safety threshold approved by the National Assembly.

Data from the Government's report shows that the estimated public debt in 2024 is 36-37% of GDP (the target according to Resolution 23 of the National Assembly is below 60%); Government debt is 33-34% of GDP (the target is below 50%); the estimated foreign debt of the country is 32-33% of GDP (the target is below 50%); the Government's direct debt repayment obligation is estimated to be 21-22% of State budget revenue (target is below 25%)...

Along with that, the Government debt structure by the end of 2024 will continue to improve in a positive direction.

Domestic debt is increasing; foreign debt is decreasing, of which the foreign debt portfolio is mainly ODA loans, preferential loans signed with long terms and preferential interest rates.

Domestic debt is estimated to account for about 76% of the Government's outstanding debt, mainly Government bonds, foreign debt is estimated to account for about 24% of the Government's outstanding debt.

Regarding domestic debt, continuing to strengthen the role of long-term investors in the Government bond market and reducing the proportion of Government bonds held by commercial banks.

By June 30, 2024, the holding ratio of Government bonds by insurance companies, Vietnam Social Security, investment funds, and financial companies will reach about 62.5% of total outstanding debt, the rest will be commercial banks, securities companies, investment funds, and other investors.

Meanwhile, for foreign debt, the main creditors are bilateral and multilateral development partners such as Japan, Korea, the World Bank, and the Asian Development Bank.

In 2024, the average issuance term of the debt portfolio will continue to be relatively long. By September 5, 2024, Government bonds issued will have a term of 5-30 years and an average issuance term of about 11.05 years, ensuring the target of 9-11 years set by the National Assembly, contributing to minimizing the risk of debt restructuring.

At the same time, the average issuance interest rate as of September 5, 2024 is about 2.48%/year, flexibly managed, in accordance with developments in the domestic financial and monetary market and in harmony with monetary policy.

Problems related to public investment and bidding have not been thoroughly resolved

In addition to positive results, the Government has also identified a number of shortcomings in public debt management.

Accordingly, the progress of negotiations and signing of foreign loan agreements by the Government is slower than expected because many projects have not completed investment procedures or have completed investment procedures but have not been allocated medium-term public investment capital, leading to delays in submitting negotiation policies.

On the other hand, due to differences between domestic regulations and donor regulations (bidding procedures, site clearance) in the context of continued harmonization of domestic laws, the negotiation process and procedures are more complicated and prolonged.

Foreign borrowing costs are currently higher than the average domestic borrowing costs and pose risks related to exchange rate fluctuations between foreign currencies/local currencies, market conditions and the ability to manage risks of foreign currency loans.

Vietnam terminated ODA loans with highly preferential loan conditions and switched to loans under market conditions, the loan interest rates of the two largest multilateral organizations during this period fluctuated between 5.91%/year - 6.5%/year.

For bilateral loans, some partners still provide preferential loans with low fixed interest rates, long loan terms, but most have binding conditions (Korea, Japan, Austria, Finland, etc.);

Some other bilateral partners tend to introduce loan conditions that are approaching the market (loans with floating interest rates such as France, Germany).

Disbursement of public investment capital from foreign sources is low, estimated disbursement of public investment capital in the first 9 months of the country reached 47.29% of the plan assigned by the Prime Minister, of which disbursement of foreign capital reached 24.33% of the plan assigned by the Prime Minister.

The shortcomings and limitations in mobilizing and managing the use of loan capital are due to both objective and subjective reasons.

The objective reasons include the fact that our country has become a low-middle-income country, gradually approaching the market interest rate; and the international interest rate level remains high.

However, the subjective reasons are still the key ones. In the context of our country's legal system being completed, problems related to public investment and bidding have not been resolved while ensuring strict compliance with domestic laws for loan agreements, international loan treaties, along with pressure from donors to widely apply international standards.

To resolve the shortcomings and inadequacies, the Government proposed that the National Assembly add three draft laws to the agenda of this 8th Session, including the draft Law on Public Investment (amended); the draft of 1 law amending 4 laws related to planning, bidding...; and the draft of 1 law amending 7 laws in the financial field.