HÀ NỘI — The Vietnamese Government plans to borrow more than VNĐ1.7 quadrillion (US$73.2 billion) in the 2021-23 period to meet the capital demand for socio-economic development, according to the public debt management plan for the next three years approved late last week.

The borrowing aimed to ensure a balance for the State budget and promote socio-economic development at an appropriate level of cost risk. Of the sum, around VNĐ1.6 quadrillion would be borrowed for the central budget while VNĐ134.4 trillion would be for refinancing.

The plan also aimed to tightly control debt indicators to ensure budget safety and accelerating the development of the domestic capital market.

The Ministry of Finance asked the Government to be active in issuing bonds, restructuring debt portfolio and developing the Government bond market. In addition, the ministry must arrange resources for debt payment to prevent overdue debts which might affect the Government’s international commitments.

The Government would limit the issuance of new guarantees for enterprise loans with the increasing rate of the total outstanding Government-backed loans not exceeding the growth rate of the country’s gross domestic product (GDP).

Regarding the borrowing of local governments, the deficit level would be capped at about 0.2 per cent of GDP.

The increasing rate of short-term foreign commercial loans of enterprises and credit institutions would be controlled at less than 18-20 per cent per year and below $6.35-7 billion for medium and long term loans to ensure the country’s foreign debt within the allowable limit.

In 2021, the Government would borrow more than VNĐ624.2 trillion, around 84 per cent of which were from domestic lenders and the rest from foreign sources.

Of the figure, VNĐ318.87 trillion would be spent in offsetting overspending, VNĐ260.9 trillion for repaying debts and VNĐ44.4 trillion for refinancing.

This year, the Government must repay debts worth VNĐ394.5 trillion. Compared to GDP which was worth VNĐ6.3 quadrillion in 2020, the amount of debt the Government must repay this year was equivalent to 6 per cent. Meanwhile, GDP growth rate was at just 2.91 per cent last year due to the impacts of COVID-19.

Local governments would have to borrow VNĐ28.79 trillion and pay debts worth VNĐ6.6 trillion, including VNĐ2.66 trillion in interest, this year.

The Government asked the Ministry of Finance to develop the public debt management plan for the 2021-25 period, together with a public debt strategy for 2021-30 and a project to improve the credit rating to 2025 with a vision to 2030 as well as a project to promote the application of information technology in public debt management for approval.

The focus must be placed on promoting the development of the domestic capital market and the Government bond market towards diversifying products and investors with priority given to long-term investors and attracting the participation of foreign investors in the domestic debt market.

The State Bank of Việt Nam must keep a close watch on foreign loans of enterprises to ensure they are within the allowable limit.

The central bank was urged to work with the Ministry of Finance to develop the legal framework and tools for managing foreign debts appropriate to the economic development requirements in the context that Việt Nam becomes a middle-income country.

The ratio of public debt to GDP of Việt Nam decreased from 63.7 per cent in 2016 to 55.3 per cent in 2020, within the National Assembly’s set ceiling of 65 per cent, meaning that the pressure from public debts eased significantly during the past five years.

The budget deficit was estimated at VNĐ248.5 quadrillion in 2020, or less than four per cent of GDP. For the 2016-20 period, budget deficit averaged 3.6 per cent of GDP.

In 2020, the Government issued bonds worth VNĐ333 trillion to offset overspending and pay debts, mostly medium and long term loans.

No bonds with terms of less than five years were issued last year. The maturity terms of Government bonds issued in 2020 were 3.5 times longer than 2011, from an average of 3.9 years to 13.94 years. On average, the maturity terms of Government bonds as of the end of 2020 averaged 8.42 years, five times longer than the end of 2011.

Besides, Việt Nam did not borrow any new loans from international financial institutions such as the World Bank and the Asian Development Bank in 2020, which contributed to consolidating the credit rating of Việt Nam.

Moody's Investors Service in March affirmed the Government of Việt Nam’s long-term issuer and senior unsecured ratings at Ba3 and changed the outlook to positive from negative.

In April, Fitch Ratings revised Việt Nam's outlook to positive from stable and affirmed the long-term foreign-currency issuer default rating at 'BB'.

S&P in May 2020 retained Việt Nam’s sovereign credit rating at BB with a stable outlook. — VNS