Public debt safety index within warning threshold

	Public Debt Strategy by 2030: towards public debt safety and national financial security
	Public debt safety indicators are strictly controlled

The workshop.

Ensure mobilization of loans for the state budget and development investment

Speaking at the opening of the workshop, Mr. Truong Hung Long, Director of the Department of Debt Management and External Finance (Ministry of Finance), said that the 5-year plan for public debt borrowing and repayment for the period 2021-2025 is implemented inthe context of complicated and unpredictable changes in the global and regional landscape.

In 2021, Covid-19 pandemic affected all aspects of the world economy. Many countries have had to provide emergency fiscal support policies through loans, causing the high increase in global debt levels.

In 2022, the Russia-Ukraine conflict and China's prolonged "zero Covid" policy caused supply chain disruptions. Inflation hit record in 2022, central banks around the world tightened monetary policy, causing the increase in interest rates.

The complicated development of the Covid-19 pandemic forced Vietnam to implement social distancing in the first 10 months of 2021, causing low economic growth, only 2.58%-the lowest level in the past 30 years.

From the end of 2021 until now, Vietnam has executed a vaccine strategy and gradually reopened the economy. The economy recovered strongly in 2022 and decreased in the first half of 2023 following the global economic slowdown.

Mr. Truong Hung Long said that amid the unfavorable developments in the world and the region, Vietnam has maintained socio-political stability, the macro-economic foundation, controlled inflation and ensured major balances of the economy.

However, Vietnam still faces many challenges due to the high economic openness, which are affected by external shocks. Impacts of climate change, natural disasters, epidemics, and environmental pollution put pressure on finance and budget.

The leader of the Department of Debt Management and External Finance said that the public debt management in the period 2021-2023 has achieved some outstanding results. Accordingly, public debt safety is within the ceiling - warning threshold approved by the National Assembly; ensure the mobilization of loans for the state budget and development investment; make full and on-time debt repayments, contributing to improving the national credit index.

In 2022, Vietnam’s national credit rating was upgraded by Moody's and S&P, and the national credit rating maintained by Fitch.

Vietnam makes major reform in public debt management

At the workshop, Andrea Coppola, World Bank Lead Country Economist and Program Leader for Equitable Growth, Finance and Institutions in Viet Nam said that “Vietnam has made major reform in public debt management in the past decade, including improvingthe legal framework and institutional capacity related to public debt management”.

Related to the need to mobilize large capital in the coming years when Vietnam becomes a middle-income country and then a high-income country, it requires more investment to maintain high economic growth. In addition, the climate change creates great challenges for Vietnam,to solve this risk and ensure growth, it needs to make huge investment.

In such a context, the debt management environment has been changed, the selections in capital mobilization create new needs in the debt management system.

The World Bank representative also said that the role of the Social Insurance Fund - a large source of capital mobilization, will gradually decrease. The cost of raising debt increases because capital mobilization must follow market interest rates. “This means that proactive debt management will become more important in the next years,” emphasized Andrea Coppola.

The World Bank representative also mentioned a potential challenge in the near future that Vietnam's debt management is still fragmented. Some countries such as Thailand and Indonesia have established debt management agencies, including issuing debt decisions based on the analysis of debt portfolios, costs and risks.

The World Bank’s opinion is that the institutional reform will facilitate debt mobilization, thereby supporting effective domestic market development and budget management, said Andrea Coppola.

“Vietnam has set out a 10-year strategy to achieve the goal of establishing a debt management agency by 2030, reflecting the important role of institutional reform, requiring the revision of legal regulations, and showing debt management reform as part of public financial management,” said Andrea Coppola.

The World Bank representative affirmed that the World Bank will support the Ministry of Finance and the Ministry of Planning and Investmentin strengthening debt management and support activities, including through the Government debt risk and management program that has been introduced into Vietnam since 2019, which supports Vietnam in better macroeconomic and fiscal management, prevents external shocks, improves debt management capacity and institutions.

Sharing about difficulties and limitations in implementing the plan, the representative of the Department of Debt Management said that the size of the domestic government bond market has not been developed, and the loan conditions have been tighten while the pressure for capital mobilization for development investment is large; the mobilization of ODA and concessional loans is increasingly difficult, the loan conditions are increasingly less favorable when the rate of disbursement of the country is still lower than the estimate and there is a difference between the sponsor's regulations and domestic laws.

The reform of the public debt management agency under the model inline with international practices since 2020 under Resolution No. 07-NQ/TW of the Politburo has not yet been implemented; local government debt management needs to be further improved.

Regarding the key solution orientations to complete the plan, the department said that

in addition to implementing the solutions set out in Decree No. 23/2021/QH15 of the National Assembly, perfecting institutions and policies, the Ministry of Finance proposed to the Government to report to the National Assembly solutions to strengthen management to effectively implement the plan for public debt borrowing and repayment for the period 2021-2025.

The Ministry of Finance proposed that in some unfavorable times, interest rates on government bonds increased, the mobilization of short-term government bonds with equivalent interest rates with long maturities is accepted, thereby meeting market demand and increasing liquidity for the secondary government bond market.