VietNamNet Bridge – Domestic and international experts have
both affirmed that the current public debt of Vietnam is still within the
safety line. However, experts believe that the public debt is marching close
towards to the ceiling public debt threshold allowed.
The National Assembly has decided
that the public debt must be lower than 65 percent of GDP by 2015. One would
sigh with relief when realizing that the current public debt ratio is still
below the ceiling.
However, he should be informed
that the public debt has been increasing, which would threaten the national
economy development in medium and long terms, and put a hard pressure on the
fiscal policies the Government plans to implement to push up the economic
growth.
Budget deficit worryingly high
According to the Ministry of
Finance, the trade deficit has been hovering around 4-6 percent of GDP over the
last 10 years.
Experts believe that the
situation would not be improved in 2012, because the income sources of the
state budget are getting limited, while the budget spending would not decrease.
Under the government initiated
programs to support businesses, some kinds of taxes and fees would be exempted
or reduced. Meanwhile, there are many unprofitable businesses in 2012 would not
have to pay tax.
In the first seven months of the
year, the State collected 363 trillion dong in tax, or 49 percent of the yearly
estimates, which was even lower than the 386,800 billion dong of the same
period of the last year.
Meanwhile, the budget spending
had reached 50.3 percent of the yearly plan by mid-July. Especially, the
disbursement for the public investment projects in the last six months of the
year is expected to be 50 percent higher than that in the first six months.
If the situation cannot be
improved, and if the GDP grows by 5-5.5 percent as predicted by many economists,
it would be impossible to curb the budget deficit at less than 4.8 percent as
targeted.
The seeds of public debts
Though Vietnam’s public debt
remains safe, it has been increasing steadily year after year due to the
prolonged budget deficit. In 2009, Vietnam’s total public debt was equal to
52.6 percent of GDP. Meanwhile, the figure soared to 58.7 percent in 2011.
However, the biggest latent risk
for Vietnam is not the debts written down in books. It is the bad debt incurred
by state owned enterprises (SOEs), which should be seen as the germ,
threatening the public debt security. The SOEs may not be able to pay debts,
which means that the State would have to come forward and pay the debts for the
enterprises.
The SOE restructuring plan
drafted by the Ministry of Finance in 2012 showed that the domestic debts of
SOEs have nearly reached 16.5 percent of GDP. As such, if counting on the
figure when calculating Vietnam’s total public debts, one would see that the
total public debts have far exceeded the safety line of 65 percent of GDP.
The second threat comes from the
debt payment deadline of domestic loans. It is estimated that 88.7 percent of
the government bond debts and the government-guaranteed bonds have the terms of
2-5 years.
This means that Vietnam would
have the responsibility of paying big domestic debts within a short time in the
near future (roughly 4-5 billion dollars a year in the next four years).
In 2013, about 65,400 billion
dong worth of bonds would become matured, which have the average interest rate
of 11.12 percent per annum. The figures would be 67,700 billion dong and 10.93
percent per annum, respectively for 2014, and 68,800 billion dong and 10.72
percent for 2015.
Compiled by Mai Thanh
Business & Investment Opportunities
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