The Government directs to focus on strictly managing public debt.

According to the announcement of the Government Office, at the regular meeting in October 2014, the Government discussed and agreed to continue to synchronously implement solutions to strengthen public debt management, ensure within the permitted limits, use borrowed capital to invest in developing socio-economic infrastructure along with strict control, improve efficiency, avoid waste and loss, and arrange sources for full and timely debt repayment according to regulations.

Construction of a drainage culvert on Dien Bien Phu Street, Hue, a project using ODA capital from the Japanese Government. Photo: VNA

The national public debt and foreign debt strategy for the 2011-2020 period and vision to 2030 stipulates that public debt by 2020 shall not exceed 65% of GDP, government debt shall not exceed 55% of GDP, and national foreign debt shall not exceed 50% of GDP; the Government's direct debt repayment obligation (excluding loans for re-lending) shall not exceed 25% of total state budget revenue.

By the end of 2013, public debt was 54.2% of GDP (of which government debt was 42.3%, government-guaranteed debt was 11.1%, local government debt was 0.8%) and the country's foreign debt was 37.3% of GDP. It is expected that by the end of 2014, public debt will be about 60.3% of GDP (of which government debt is 46.9%, government-guaranteed debt is 12.6%, local government debt is 0.8%) and the country's foreign debt will be 39.9% of GDP. These indicators are within the limits allowed by the National Assembly's Resolution.

Recently, due to the impact of the financial crisis and global economic recession, our country's economic growth has slowed down, the budget revenue ratio is lower than the same period but we still have to reduce taxes to support businesses (the rate of tax and fee mobilization into the state budget has decreased from 24.8% of GDP on average in the period 2006-2010 to 21% of GDP in the period 2011-2015).

Meanwhile, the budget expenditure requirement has increased sharply, requiring a large budget to implement economic stimulus policies, salary reform, and ensure social security (the proportion of human expenditure in total regular expenditure increased from 62.2% to 68.2%; in the period 2011-2014, the minimum wage was adjusted 3 times and public service allowances were increased 2 times; social security expenditure increased by an average of 18%/year, higher than the growth rate of about 10% of budget revenue and expenditure).

Therefore, the remaining state budget resources for debt repayment and development investment are very limited while the demand for investment capital to implement strategic breakthroughs in developing the socio-economic infrastructure system is very large.

Therefore, in the 2011-2015 period, 335 trillion VND of government bonds had to be issued, more than 2.5 times the 2006-2010 period (250 trillion VND was issued in the 2011-2014 period, and an additional 85 trillion VND was planned to be issued in 2015). At the same time, the disbursement of ODA capital, preferential loans and loan guarantees to invest in infrastructure projects in transport, irrigation, energy, health, education, new rural construction, etc. according to the Resolution of the Party and the National Assembly was promoted. Therefore, public debt increased rapidly, from 51.7% of GDP in 2010 to 60.3% of GDP by the end of 2014 and 64% of GDP by the end of 2015.

On the other hand, Vietnam has become a middle-income country, so the proportion of ODA loans and foreign concessional loans with long terms and low interest rates in public debt has gradually decreased, so we have switched to domestic loans in accordance with the spirit of the Resolution of the Party, the National Assembly and the Public Debt Strategy.

The proportion of domestic borrowing increased, mainly through the issuance of short-term government bonds (in 2012, the average issuance term was 2.9 years, the average interest rate was 10%/year; in 2013 it was 3.4 years and 7.96%/year; in the first 10 months of 2014 it was 4.84 years and 6.81%/year), leading to a rapid increase in the Government's direct debt repayment obligations in the short term.

In that context, we still ensure full debt repayment, not allowing overdue debt to arise. The direct debt repayment ratio of the Government compared to the total state budget revenue in 2014 is estimated at about 14.2% (according to the provisions of the Public Debt Strategy, it is not more than 25%). In addition, a part of the new loans is used to roll over debt with longer terms and lower interest rates, contributing to reducing short-term debt repayment pressure and reducing borrowing costs (in 2014, the debt rollover loan was about 77 trillion VND). This debt rollover does not increase public debt and is in line with international practice.

Public debt is an important source of capital to supplement investment in developing the socio-economic infrastructure system. Over 98% of the loan capital is used directly for infrastructure projects, the rest is included in the state budget for investment expenditure (1.5%) and a part of the career expenditure in ODA loan projects according to commitments (0.4%).

Many important and essential projects in transportation, electricity, water, irrigation, healthcare, education, etc. have been completed and are showing effectiveness, and are continuing to invest in building many new projects, contributing to attracting domestic and foreign investment capital, promoting structural transformation and improving production and business efficiency, economic growth, thereby increasing budget revenue and ensuring debt repayment.

In the coming time, the Government will continue to direct ministries, branches and localities to: (1) Focus on strictly managing public debt, especially new loans (including Government loans, Government-guaranteed loans and loans from local authorities), ensuring that they are within the permitted limits and ensure national financial safety; focus on investing in essential socio-economic infrastructure projects according to the planning. (2) Strengthen inspection and supervision of the use of loans, ensuring efficiency and compliance with regulations. (3) Urgently restructure public debt towards rapidly increasing the proportion of long-term loans with low interest rates. (4) Strictly control the debt repayment guarantee for loans guaranteed by the Government and collect enough debt for loans for re-lending. (5) Arrange resources from the state budget within the prescribed limits and use the Debt Repayment Accumulation Fund to repay debts on time. (6) Review and improve institutions, amend and supplement the State Budget Law, the Public Debt Management Law, the Medium-term Public Debt Management Strategy and Program.

Strive to gradually reduce public debt indicators in the 2016-2020 period so that by 2020 public debt will be about 60.2% of GDP, government debt will be about 46.6% of GDP, the country's foreign debt will be about 46% of GDP and the ratio of direct debt repayment of the government to total state budget revenue will be about 20% (the prescribed limit is not more than 25%). Ensure national financial security.

According to Vietnam+