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The public debt strategy to 2030 which has been approved by the Government has set specific goals for the public debt management in the new period. To do this, the assessment of the impacts of loans on public debt balance, Government debt and debt repayment obligations will be regularly carried out and the state budget overspending rate and the debt repayment rate from the state budget must be controlled within the allowable threshold.
Regularly assess impacts of loans on public debt balance
From now to 2030, Vietnam's public debt strategy aims to raise loans to meet the needs of the state budget in each period with reasonable borrowing costs which are in accordance with the level of risks of loans and debt repayment ability; maintain public debt and government debt indexes at safe levels, control foreign debt, ensure national financial security; promote the development of the domestic capital market in association with the goals and tasks of the 10-year socio-economic development strategy for the 2021-2030 period.
Regarding specific goals, from 2021 to 2025, Vietnam aims to control state budget overspending within the rate approved by the National Assembly in the state budget estimate and the five-year national financial plan for the 2021-2025 period, ensuring the debt safety criteria including the debt ceiling, the threshold under the limit approved by the National Assembly.
It is expected that by 2030, public debt and government debt will not exceed 60% of GDP and 50% of GDP respectively. The Government's direct debt repayment obligation will not exceed 25% of the total state budget revenue and the country's external debt will not exceed 45% of GDP on average.
In mobilization and use of loans, Vietnam will regularly assess the impacts of loans on public debt, government debt and debt repayment obligations. In annual state budget management, the rate of state budget overspending and the rate of direct debt repayment from the state budget must be ensured within the allowable threshold.
Along with that, Vietnam regularly issues Government bonds with standard maturities, focusing on long-term bonds from five years or more, and flexibly issue bonds with less than five years, issuing foreign currency bonds on the domestic market to meet the demand for capital mobilization and to realize the development target of the government bond market, issue international bonds to offset the central budget deficit for development investment, and to restructure government debt.
In particular, the Government will focus on disbursing all signed ODA and concessional loans until the end of 2020. The mobilization of new foreign loans will prioritize key areas to maximize economic efficiency; prioritize investment in projects that directly promote growth associated with sustainable development and have spillover effects; develop a number of public investment programs to implement a number of important and key projects and works.
Furthermore, the Government will manage local government debt within the local budget overspending rate approved by the National Assembly; strictly control contingent debt liabilities, ensure the debt repayment source guaranteed by the Government as well as strictly control foreign debt by self-borrowing and self-paying of enterprises and credit institutions, and control the international foreign debt within allowable limits.
Eight important solutions to implement the public debt strategy
To achieve the above objectives, the Government has developed eight important solutions: perfecting institutions, policies and debt management tools; applying modern debt management tools and measures; effectively mobilizing, managing and using loans; further improving publicity and transparency in public debt mobilization, management and use, and raising national credit; developing the domestic financial market and capital market; strictly control the contingent debt liabilities of the State budget; organizing apparatus structure, applying information technology; and conducting inspection and supervision.
Regarding public debt, the Government also issued a decision approving the three-year public debt management program for the 2022-2024 period and the public debt borrowing and repayment plan in 2022.
Accordingly, in 2022, the Government expects to borrow VND673,546 billion; and pay about VND335,815 billion of debt.
Loans guaranteed by the Government, the maximum bond issuance guarantee for the Bank for Social Policies will be VND20,400 billion and the bond issuance guarantee for the Vietnam Development Bank is equal to the principal debt repayment obligation of Government-guaranteed bonds at the due date within the year.
Regarding the local borrowing and repayment, the borrowing from the relending source of the Government's foreign loans and other domestic loans will be about VND28,637 billion; local government debt repayment will be VND6,111 billion. For foreign commercial loans of enterprises that are not guaranteed by the Government, the maximum limit of medium and long-term foreign commercial loans of enterprises and credit institutions by the method of self-borrowing and self-payment will be US$7,300 million; the growth rate of short-term foreign debt balance will be about 25% of the outstanding balance as of December 31, 2021.
Public debt is being effectively controlled
Assessing the picture of Vietnam's public debt, Mr. Vo Huu Hien, Deputy Director of the Department of Debt Management and External Finance (Ministry of Finance) said that Vietnam's public debt has been effectively controlled and deeply reduced from 63.7% of GDP in 2017 to 55.9% of GDP in 2020 on the basis of reassessed GDP.
In 2021, public debt continues its downward trend, restrained at 43.1% of GDP on the basis of reassessed GDP. This result was mainly due to the persistent and effective implementation of the policy of restructuring the state budget and public debt with specific goals, solutions and roadmap in the period before the fourth wave of the Covid-19 pandemic.
Regarding the Government's debt structure, the proportion of foreign loans has been decreasing, from 60% in 2010 to about 40% in 2016 and nearly 33% by the end of 2021, thereby also contributing minimizing exchange rate risk for the Government debt portfolio.
For the domestic debt portfolio, the outstanding balance of government bonds accounted for nearly 86% and the issued bonds from 2017 up to now all have maturities longer than five years. According to the assessment of international organizations, these are the factors helping sustainably increase Vietnam's debt.
Source: Customs News