Three ministries jointly managing public debt is unreasonable

The National Assembly's Finance and Budget Committee proposed regulations in the direction of assigning only one agency as the unified focal point to perform the function of state management of public debt.

On the morning of May 25, Minister of Finance Dinh Tien Dung presented the draft Law on Public Debt Management (amended) to the National Assembly. Chairman of the National Assembly's Finance and Budget Committee Nguyen Duc Hai presented the project's appraisal report.Law on public debt management(modify).

Many shortcomings in public debt management

The Government's report stated that the Law on Public Debt Management also creates conditions to strengthen strict debt management, ensuring full and timely repayment of government debt. By the end of 2016, debt indicators were basically within the allowable limits: public debt was at 63.7% of GDP, government debt was at 52.6% of GDP, the country's foreign debt was at 44.3% of GDP, and the government's direct debt repayment obligation was 14.8% of total state budget revenue.

However, the process of public debt management according to the provisions of the Law on Public Debt Management in 2009 has also revealed some shortcomings and limitations such as legal inadequacies when there are still different views on the scope of public debt, there needs to be a consensus on whether to include debts arising from budget management, debts of state-owned enterprises (SOEs), debts of the State Bank of Vietnam (SBV) in public debt or not? Secondly, public debt management has also revealed some major inadequacies such as: public debt, government debt increasing rapidly, causing great pressure on debt repayment obligations (in addition to the increase in domestic debt).

Minister of Finance Dinh Tien Dung submitted to the National Assembly the draft Law on Public Debt Management (amended). Photo Quochoi.vn

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), focusing on 3 major creditors: Japan (increased 6.8 times), the World Bank (increased 11.5 times) and the Asian Development Bank (increased 20.3 times).

The allocation and use of loans for investment are still scattered and ineffective. In fact, some projects that re-borrow ODA loans, preferential loans, and government guarantees have run the risk of not being able to repay their debts, requiring financial restructuring, switching to the form of State investment or the Accumulation Fund having to pay on their behalf; there is still a lack of connection between investment decisions and debt repayment balance.

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, the responsibility for borrowing and debt repayment has not been linked to the allocation and use of public debt; the inspection, supervision, audit, settlement and reporting on the implementation of public debt issues have not been given due attention.

Amending the Law on Public Debt Management is necessary

Minister Dinh Tien Dung emphasized that amending the 2009 Law on Public Debt Management is necessary.

This amendment also aims to ensure compliance with the provisions of the 2013 Constitution and consistency and synchronization with the relevant legal system issued after the Law on Public Debt Management from 2009 to present. In addition to ensuring compliance with the provisions of the 2013 Constitution, the Law on Public Debt Management is also related to a number of laws that have been issued by the National Assembly in recent times, such as the State Budget Law (2015), the Law on Public Investment (2014), the Law on Government Organization (2015), and the Law on Organization of Local Government (2015). Therefore, amending the Law on Public Debt Management to create consistency and synchronization in the system of legal provisions in general and regulations related to public debt management in particular is extremely necessary.

The notable goal according to the Government is to overcome the existing problems, difficulties, lack of synchronization, and inadequacies in the implementation of the current Law on Public Debt Management and ensure feasibility and stability, contributing to improving the effectiveness and efficiency of management and use of loans, ensuring national financial security. Clearly define the functions, tasks, and powers of agencies in public debt management; attach accountability according to the assigned functions and tasks from mobilizing, allocating, managing, using, and repaying public debt.

It is proposed to assign only one agency as the focal point according to the Government's assignment.

In the review report on the Draft Law on Public Debt Management, Chairman of the National Assembly's Finance and Budget Committee Nguyen Duc Hai said that many opinions in the Finance and Budget Committee proposed to stipulate that only one agency should be assigned as the unified focal point according to the Government's assignment to perform the function of state management of public debt, including the function of state management of ODA capital, preferential loans from foreign donors, as the unified focal point for mobilizing, negotiating framework agreements, loan agreements, allocating and using capital, repaying loans, etc.

“The current regulation that many agencies are the focal points for public debt management does not meet the requirements of administrative reform and will not overcome the limitations that are occurring in reality. Many agencies manage public debt at different stages, leading to a situation of decentralized management. Coordination is not tight, so monitoring, summarizing reports, settlement, statistics, especially determining the responsibility for borrowing, debt repayment, evaluating the effectiveness of loan use, and arranging counterpart funds are still difficult and inadequate.

Good practice that many countries in the world have been implementing is to clearly stipulate a centralized management agency, unifying public debt resources. If necessary, relevant laws will be adjusted accordingly," said Nguyen Duc Hai, Chairman of the National Assembly's Finance and Budget Committee.

According to Kienthuc.net.vn