Who are Vietnam's three main creditors?

Minister of Finance Dinh Tien Dung reported to the National Assembly that in recent years Vietnam has mobilized a large amount of ODA from three main creditors: Japan, the World Bank, and the Asian Development Bank.

Minister of Finance Dinh Tien Dung - Photo: Quochoi.vn

This information was provided by Mr. Dung when he presented the draft Law on Public Debt Management (amended) to the National Assembly on behalf of the Government this morning, May 25th.

The pressure on debt repayment obligations is immense.

According to the Minister of Finance, by the end of 2016, debt indicators were basically within permissible limits: public debt at 63.7% of GDP, government debt at 52.6% of GDP, and national foreign debt at 44.3% of GDP.

During the period 2010-2016, over 1,277 trillion VND of government bonds were issued at an average annual growth rate of 36%; a large amount of ODA and preferential capital was mobilized from foreign donors with a total committed value of 36.6 billion USD, of which 32.8 billion USD has been disbursed.

The government has also provided guarantees for businesses and policy banks to mobilize 632.8 trillion VND to implement key and urgent programs and projects, as well as infrastructure investment projects requiring large capital investments, in accordance with the Party and State's policies.

In addition, local authorities have mobilized 139 trillion VND through bond issuance and borrowing from the Government's foreign loans for socio-economic development in the locality.

According to the government's assessment, public debt management has also revealed several major shortcomings, such as: the rapid increase in public debt and government debt is putting significant pressure on debt repayment obligations (in addition to the increase in domestic debt), notably there has been a substantial increase in outstanding ODA loans and preferential foreign loans (in 2015, it increased 6.5 times compared to 2001).

"The focus is on three major creditors: Japan – up 6.8 times, the World Bank (WB) – up 11.5 times, and the Asian Development Bank (ADB) – up 20.3 times; the allocation and use of borrowed capital for investment is still scattered and not very effective. In fact, some projects that borrowed ODA, preferential, and government-guaranteed loans have incurred risks of default," Mr. Dung said.

The National Assembly decides on the debt safety target.

The government has analyzed the causes of this situation as being due to the economic structure and growth model that relies primarily on capital; weak socio-economic infrastructure; high investment pressure while domestic capital accumulation is still thin; the small size of the domestic capital market; and the adverse impact of the global economy.

Furthermore, there is still a mentality of state subsidies, especially for ODA funds and government bonds; the capacity of some project owners remains limited; there is still a problem of loss and waste in the use of investment capital; and the functions and responsibilities of public debt management are still overlapping.

Current regulations also do not link the responsibility for borrowing and repaying debt with the allocation and use of public debt; the inspection, supervision, auditing, settlement, and reporting of public debt implementation have not been given due attention.

According to the draft law submitted by the Government, the authority to decide on public debt safety indicators will now belong to the National Assembly. “Regarding public debt safety indicators: these include public debt relative to GDP; government debt relative to GDP; and the government's direct debt service obligations relative to total state budget revenue – these are important indicators. Therefore, the draft law stipulates that the National Assembly will decide on public debt safety indicators,” said Minister Dinh Tien Dung.

The 5-year public debt repayment plan is developed by the Government and submitted to the National Assembly for decision, in accordance with the 5-year medium-term financial plan (as stipulated in the 2015 State Budget Law) and the medium-term public investment plan (as stipulated in the 2014 Public Investment Law).

This draft law will be discussed by the National Assembly in the coming days.

According to tuoitre.vn