Vietnam - Public debt concerns watered down

The Ministry of Finance has calmed the public's growing concerns about Vietnam’s rising public debt.

The ministry’s (MoF) Minister Vuong Dinh Hue told the National Assembly that: “We are not so optimistic, but not so worried about Vietnam’s public debt,” because a large part of the debt was long-term preferential foreign loans.

Hue reported that up to December 31, 2011 the country’s public debt was estimated to occupy 58.4 per cent of gross domestic product (GDP).

“This figure is calculated based on a scenario in which GDP will rise by 6 per cent this year. If the GDP augments by 6.5 per cent, the public debt rate will be far lower,” Hue said.

He said that 75 per cent of the debt structure was from official development assistance (ODA) loans, 19 per cent from foreign preferential loans and only 6 per cent came from commercial loans.

For example, the ODA loans were long-term ones with low lending rates. Specifically, the World Bank loan would last 40 years, with a grace period of 10 years and lending rate of 0.75 per year. Meanwhile, the Asian Development Bank loan would be valid within 30 years, with a grace period of 10 years and a lending rate of 1 per cent per year. The loan from Japan would last 30 years, with a grace period of 10 years and a lending rate of 1-2 per cent, per year.

“Thus, we cannot compare Vietnam’s public debt with that of other countries, where public debt structure largely includes commercial loans,” Hue said.

On the day of opening the 13th National Assembly’s ongoing second session, Prime Minister Nguyen Tan Dung said the public debt was estimated to be 54.6 per cent of GDP at the end of this year and 60-65 per cent of GDP by 2015. “Vietnam’s public debt remains within the safety zone,” he said.

But, the Vietnam Economics Institute said such a high debt rate “has broken the safe level of national financial security earlier determined by the government.”

According to the institute, the MoF’s definition on public debt includes government’s debt and debts guaranteed by the government only, not State Bank, government bodies including state-run enterprise debts as defined by the United Nations. “If we calculate the public debt under the United Nations’ definition, Vietnam’s public debt rate will be about 70 per cent,” said an institute report on public investment.

According to MoF figures, the country’s public debt at the end of 2010 sat at 57.3 per cent of GDP. The rate surged 25 per cent from 2007 to 2011, or an average 5 per cent annually.

This has sparked growing concerns over Vietnam’s public debt among the public and National Assembly deputies that the debt could reach 70 per cent by 2015.

But, Hue said Vietnam’s 2011-2015 public debt would account for 60-65 per cent of GDP annually.

“The government has carefully calculated the debt and will have a proper strategy to manage public debt. We have already submitted a strategy to manage public debt until 2020 to the prime minster for consideration. Then the strategy will be approved by the Politburo,” Hue said.

Nguyen Thanh | vir.com.vn

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