Who are Vietnam's three main creditors?

Finance Minister Dinh Tien Dung reported to the National Assembly that recently 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

The information was given by Mr. Dung when representing the Government submitting to the National Assembly the draft Law on Public Debt Management (amended) this morning, May 25.

Great pressure on debt repayment obligations

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

During the 2010-2016 period, over VND1,277 trillion of government bonds were issued with an average growth rate of 36% per year; a large volume of ODA and preferential capital was mobilized from foreign donors with a total committed value of USD36.6 billion, of which USD32.8 billion was disbursed.

The Government has also provided guarantees for enterprises and policy banks to mobilize VND632.8 trillion to implement key and urgent programs and projects, and infrastructure investment projects requiring large investment capital according to the policies of the Party and State.

In addition, local authorities have mobilized VND139 trillion through bond issuance and re-borrowing foreign loans from the Government for local socio-economic development.

According to the Government's assessment, public debt management has also revealed some major shortcomings such as: public debt and government debt have increased rapidly, causing great pressure on debt repayment obligations (in addition to the increase in domestic debt), notably there has been a significant increase in outstanding ODA loans and foreign concessional loans (in 2015, it increased 6.5 times compared to 2001).

“The focus is on three major creditors, namely 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 loans for investment is still scattered, with low efficiency. In fact, there have been a number of projects that re-borrowed ODA loans, preferential loans, and government guarantees that have created risks of not being able to repay their debts,” said Mr. Dung.

National Assembly decides on debt safety targets

The Government analyzed the causes of the above situation as being due to the economic structure, the growth model relying mainly on capital; weak economic and social infrastructure, high pressure on investment capital while domestic accumulation in the economy is still thin; small scale of the domestic capital market; adverse impacts of the world economy.

In addition, there is still a "subsidy" mentality from the State, especially ODA capital and government bonds; the capacity of some project owners is still limited; there is still loss and waste in the use of investment capital; the functions and tasks 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; inspection, supervision, auditing, settlement and reporting on public debt issues have not received due attention.

According to the provisions of the draft law submitted by the Government, the authority to decide on public debt safety indicators will belong to the National Assembly. “Regarding public debt safety indicators: including indicators of public debt compared to GDP; Government debt compared to GDP; direct debt repayment obligations of the Government compared to total State budget revenue, are important indicators. Therefore, the draft Law stipulates that the National Assembly decides 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 (according to the provisions of the 2015 State Budget Law) and the medium-term public investment plan (according to the provisions of the 2014 Public Investment Law).

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

According to tuoitre.vn