The State Treasury ensures budget balance by effectively mobilizing Government bonds

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The State Treasury has actively implemented solutions to mobilize Government bonds . Photo: Internet

Ensuring budget balance

According the State Treasury, as of March 20, the total volume of mobilized government bonds reached VND72,774 billion, meeting about 19.2% of the plan in 2024 and 57.3% of the plan for the first quarter of the year. The average issuance term is 11.45 years; and the average issuance interest rate is 2.21%/year.

The State Treasury said that from the first month of the year, it has focused on operating the State budget to fully and promptly meet the spending needs of the state budget and transaction units (in local and foreign currencies). The State Treasury has effectively managed risks in budget management activities.

Experts assess that the issuance of government bonds in recent times has helped ensure the balance of the central and local budgets. The issuance term is diverse, focusing on 5-year term or more to restructure the government bond portfolio in the direction of extending the term, reducing pressure on short-term debt repayment and loan costs, contributing to restructuring public debt in a safe and sustainable manner.

However, many opinions believe that with the current low interest rates of government bond, the State Treasury needs to promote capital mobilization with low costs, creating conditions for effectively restructuring bond terms.

Director of the Treasury Management Department (State Treasury) Luu Hoang said that in 2024, the State Treasury will continue to operate the budget under the approved plan, so it is focusing on issuance to balance the budget and principal repayment. In addition, the State Treasury also uses idle funds in line with regulations, lending to the central and local budgets, and supporting the state budget.

The Ministry of Finance has requested the State Treasury to manage the state treasury safely and effectively to promptly meet the spending tasks of the state budget and transaction units; to implement state treasury management operations in line with the state treasury management plan for 2024 and the first quarter of 2024. The State Treasury needs to closely grasp the market, the state revenues and expenditures, and implement Government bond bidding through the Hanoi Stock Exchange every Wednesday to mobilize capital for the central budget with appropriate volume, ensuring cost savings and efficiency in public debt management.

In the near furture, the State Treasury said it will continue to manage the budget to ensure payment needs of the state budget and of units transacting with the State Treasury (in local and foreign currencies). At the same time, deploy state treasury management operations under the State treasury management plan for 2024 and the first quarter of 2024; implement risk management in treasury management activities; control the opening of State Treasury accounts at banks and expand coordination of state budget collection and electronic bilateral payments with commercial banks in line with regulations and directions of the Ministry of Finance.

Perfecting the mechanism for government bonds

In early year, Decree 83/2023/ND-CP amending and supplementing a number of articles of Decree No. 95/2018/ND-CP of the Government regulating issuance, registration, depository, listing and trading of Government debt instruments on the stock market officially takes effect.

One of the important new contents is amending and supplementing regulations on private placement of government bonds. Accordingly, private placement is a method of directly selling government bonds to each buyer, or selecting a commercial bank or foreign bank branch to operate as a distribution and payment agent of government bonds (distribution agent) for the buyer. The Decree assigns the State Treasury to develop a plan to issue privately placed bonds and report to the Ministry of Finance for approval.

Regarding the conditions for operating a government bond distribution agent, the Decree provides new provision that commercial banks and foreign bank branches that are legally established and operated in Vietnam, are in charge of providing bond issuance agency services as per the provisions of the Law on Credit Institutions 2010 and instructions of the State Bank of Vietnam.

In addition, agents must have an operating network to meet the distribution and payment of government bonds; have a plan to implement bond distribution and payment that meets the requirements of the issuer for each issuance.

According to experts, the completion of the legal framework for the government bond market will further improve the role of this operation in the financial market, especially this regulation will help government bonds become a leading investment channel for other financial instruments. Furthermore, the issuance of privately placed bonds via commercial banks will help mobilize resources from the entire population, ensuring resources for socio-economic development programs.