Mobilizing government bonds to ensure budget balance and reduce debt repayment pressure

The State Treasury has proactively launched solutions to mobilize capital from government bonds. Photo: ST

Achieved nearly 47% of the 2024 plan

According to the latest report from the State Treasury, as of July 24, 2024, the State Treasury has issued government bonds through auctions on the Hanoi Stock Exchange, reaching VND 187.994 trillion, nearly 47% of the total government bond issuance target for 2024 (VND 400.000 billion). The average maturity is 10.9 years.

The State Treasury also stated that this maturity is in line with the target (9-11 years), thereby maintaining the average maturity of the government bond portfolio above 9 years (9.03 years), contributing to safe and sustainable public debt management. The average issuance interest rate so far is 2.4% per annum, lower than the 3.21% per annum in 2023, thereby helping to reduce the borrowing cost of the state budget, in line with market trends and the monetary policy management of the State Bank of Vietnam.

These results are thanks to the State Treasury's close monitoring of market developments, revenue and expenditure situations, and the central budget's debt repayment plan throughout the first six months of 2024. The State Treasury proactively reported to the Ministry of Finance and implemented solutions for issuing government bonds.

At the same time, the State Treasury flexibly issues bonds with various maturities, focusing on maturities of 5 years and above to ensure the maturity target according to National Assembly Resolutions No. 23/2021/QH15 and No. 43/2022/QH15; managing the issuance interest rate of government bonds in line with market interest rate trends, ensuring within the interest rate framework set by the Ministry of Finance, in line with the monetary policy orientation of the State Bank of Vietnam, contributing to controlling inflation and stabilizing the macroeconomy.

Furthermore, government bond mobilization is closely linked to state treasury management. Accordingly, the State Treasury continues to manage the state treasury in a centralized, unified, safe, proactive, transparent, and efficient manner, ensuring that it meets the full and timely spending needs of the state budget; forecasting cash flow, and implementing transactions using temporarily idle state treasury funds in accordance with regulations, such as advances, loans to the central budget, fixed deposits at commercial banks, and repurchase of government bonds.

Issued with diverse terms and reasonable interest rates

Sharing more about the government bond mobilization efforts since the beginning of the year, Luu Hoang, Director of the Treasury Management Department (State Treasury), said that the mobilization work has benefited from some positive macroeconomic factors such as stable economic growth and inflation under control. However, there are still some difficulties, such as the borrowing plan for the central budget balance of nearly VND 660,000 billion, which is focused on domestic mobilization, mainly from government bonds. Moreover, the plan to mobilize VND 400,000 billion from government bonds in 2024 is also a very heavy task as no year has reached this level before, with the highest being VND 330,000 billion, and in 2023, it reached approximately VND 300,000 billion.

Along with the above difficulties, according to Luu Hoang, the domestic and international markets are still experiencing many fluctuations, although monetary policy has been adjusted downwards, interest rates are still maintained at a high level. Moreover, domestically, due to the impact of exchange rate fluctuations since March 2024, although the State Bank has implemented intervention policies, it still has an impact on the State Treasury's capital mobilization.

Despite many impacts and market fluctuations, the State Treasury still affirms that it will adhere to the 2024 capital mobilization plan, the state budget revenue situation, the progress of public investment disbursement, the debt repayment plan of the central budget, and market developments to manage the issuance volume of government bonds appropriately, ensuring that it meets the needs of the budget deficit and principal repayment of the central budget; issuing a variety of bond terms; and managing the issuance interest rate reasonably, in line with the monetary policy orientation.

In addition, in some recent regular Government meetings, the Prime Minister has requested the study of issuing an additional VND 100,000 billion of government bonds for investment in national key projects. Regarding this issue, Luu Hoang said that the Ministry of Finance has sent a report to the Prime Minister, Deputy Prime Minister, Ministry of Planning and Investment, Ministry of Transport, etc., but so far there has been no official decision to implement. Therefore, for the time being, the State Treasury will focus on the 2024 plan of VND 400,000 billion. If there is an additional issuance, it will depend on the decision of the competent authorities."