To reduce public debt, the Government of Vietnam needs to limit the budget deficit and tighten fiscal discipline.In a report on the socio-economic situation submitted to the Standing Committee of the National Assembly of Vietnam, the Ministry of Planning and Investment evaluated: "Though public debt is still within a safe limit, the ability of capital mobilisation and debt repayment, in practice, is very difficult". Economists also expressed many concerns as public debt is rising fast.
Statistics in reports is lower than the actual situation
According to the Ministry of Planning and Investment, in the next 3 years, Vietnam has to mobilise a huge amount of public bonds to offset budget deficit, funding and to use for investment. Average annual capital mobilisation is over VND400 trillion. As for domestic mobilisation, short-term and medium-term loans accounted for 80 percent and 20 percent for long-term loans, resulting in high frequency and debt repayment level.
On the other hand, the capital mobilisation entirely depends on financial institutions, in which commercial banks accounted for 86 percent and other financial institutions accounted for 12 percent. This could lead to the concentration of cash flow of the banking system on bonds, narrowing the investment in production and business.
In 2013, the market interest rate was less affected by the issuance of government bonds because credit output for production and business faced many difficulties. However, the issuance of government bonds in a large scale will have huge negative impacts on interest rate, cost of capital and inflation in 2014 and subsequent years.
Public debt becomes an ominous issue in the eyes of economists. Tran Dinh Thien, Director of the Vietnam Economics Institute, said that Vietnam underestimated risks of public debt than the actual situation due to unclear concept of public debt, great deviation and not homogeneous measurement standards.
The most concern is the large -scale sovereign debt and tends to increase rapidly. Safe level for public debt is plummeting, specifically the capacity to increase the State budget to pay domestic loans and the capacity to promote import-export growth to pay foreign loans are at risk of rapid deterioration.
Need to limit the budget deficit
In borrowing and loans repayment plan 2014 approved by the Prime Minister, the total domestic loans is VND367 trillion including VND197 trillion of loans to offset the state budget deficit, VND100 trillion of investment bond issuance and VND70 trillion of funding.
However, according to experts from the Spring Economic Forum annually held by the Economic Commission of the National Assembly, the debt repayment obligation of the Government in 2014 is up to VND209 trillion, nearly two times that of VND129 trillion in 2013 and VND134 trillion in 2012.
Some experts warned that one of risks of public debt is the average debt time of only 3.3 years. Thus, as projects have not put into operation yet, investors have to worry of paying the debt. Besides, a serious problem of public debt is that debt is increasing; new investment capital is little while loan repayment level is high.
According to experts, in order to reduce the public debt, the Government has no choices but limit government budget deficit and tighten fiscal disciplines. At the same time, the National Assembly should have separate working sessions to discuss the public debt to figure out its core problems rather than saying that "public debt is still in the control."
PV
Vietnamese
