Strict Management over Public Debt and New Loans

 

To implement the socio- economic development plan in 2014, the Government requests ministries, agencies and provinces to pay more efforts to implement overall objectives and tasks of socio-economic indicators that were set at the beginning of the year. Besides, the Government nominates related authorities to implement measures and tasks under Resolution 01/ NQ-CP and the Resolutions of the regular meetings and the specific management activities to remove difficulties, to boost business production, economic restructuring, and administrative reform, to improve business environment, and to enhance competitiveness to ensure social security and social welfare, security, political order and social safety.

 

Specifically, the State Bank of Vietnam (SBV) creates favourable conditions for businesses to access credit, to promote growth and ensure credit quality objectives, to enhance operational control of the banking system, and resolutely to implement the restructuring of weak credit institutions.

 

The Ministry of Industry and Trade is in charge of boosting industrial production activities, especially in processing and supporting industries, promoting production capacity of advantageous industries, strengthening activities in trade, market research, market expansion and exports, actively negotiating free trade agreements, developing domestic market to ensure supply and demand and quality of goods, especially essential commodities, to serve consumers' demand at the end of the year, enhancing management of the market to prevent smuggling and trafficking in counterfeit goods and unknown goods without the origins and food safety requirements.

 

The Ministry of the Agriculture and Rural Development is to adopt plans in livestock production to serve the needs of the market in the last few months, to strengthen epidemic prevention activities to prevent risks from cattle and poultry, to develop aquaculture associated with quality control to ensure technical standards for export, to actively coordinate with the ministries, agencies and localities to implement action plans in response to complicated movements of natural disasters to minimise damages caused by natural disasters.

 

Under this Resolution, the Government Inspectorate of Vietnam is requested to implement the Law on Reception of Citizens and Decree 64/2014/ ND-CP of the Government and together the ministries, agencies and localities to focus on solving the complaints and denunciations, especially special cases related to many petitions, to perform well on the reception of citizens to follow regulations, to have a direct dialogue on the spot, definitely to settle the claims, to strengthen anti-corruption campaigns, to perform inspections and announce conclusion of inspection, and to test and urge implementation of inspection results and the guidance of the Prime Minister on the post inspection activities.

 

The Ministry of Public Security is nominated to strengthen the campaigns to control crimes and to prevent fire and explosion, especially in big cities and residential areas, and to coordinate with the Army forces to detect, prevent and fight against unsafe and disorderly activities.

The members of the Government actively address issues raised about social and economic situations, answering questions from the 8th Session of the National Assembly XIII, proactively planning action plans to implement resolutions adopted by the National Assembly, strictly implementing the contents proposed in the meeting and solving the recommendations of the voters, and urgently issuing regulations issued detailed regulations that are consistent with the laws and ordinances when they are put into effect.

Ministries and agencies, the People's Committees of provinces and central cities continue to improve the effectiveness of directions and operation with specific solutions, implementing the remaining tasks in 2014, solving the difficulties for businesses to promote socio-economic development in localities, creating remarkable changes in fields with local advantages, reviewing direction and administration of 2014, evaluating the implementation of the programme in 2014, and building the tasks, solutions and the working programme in 2015 in accordance with the objectives and tasks of the 5 year plan from 2011 to 2015.

 

Regarding public debt, the Government assesses that due to recent impacts of financial crisis and global recession, the economic growth has slowed down and state revenues are largely affected while tax incentives are being implemented to support business operation and majority of the budget are spent on socio-economic activities such as the economic stimulus policies, wage reform, social security, and development of infrastructure systems to create breakthroughs in the investment.

Consequently, this leads to an increasing public debt from 51.7 percent of the GDP in 2010 to 60.3 percent of the GDP at the end of 2014. On the other hand, Vietnam has become a low middle income country so the proportion of the ODA and the preferential long-term foreign loans at low interest rates has been declining, so the loans have been made domestically by the issuance of bonds under the Resolution of the Party and the National Assembly. The increasing proportion of the domestic borrowing is resulted mainly by the issuance of the short-term government bonds, which leads the increasing amount of the direct debts of the Government in short term.

 

In this context, the Government still ensures full repayment of loans without any raising debts. Indicators of public debt are still controlled under the limit by the Resolution of the National Assembly. Public debt is an important capital to develop infrastructure system of the social economy. Over 98 percent of the loans are used directly for infrastructure projects and the rest is spent for other investment projects (1.5 percent) and the ODA loan projects as a commitment (0.4 percent). Many of the important and essential works in transportation, electricity, water, irrigation, health and education have been completed effectively. Besides, funds are channeled into many new projects to attract more domestic and foreign investment flows to not only build up new infrastructure systems but also attract new foreign investment, promoting restructuring and improvement of business efficiency and economic growth. This helps increase revenue and ensure repayment sources.

 

In the coming time, the Government continues to direct ministries and local governments to strictly manage public debts, especially new loans, including loans from the Government, guaranteed loans of the government and local authorities in order to ensure permitted limit and effectively invest the state budget in the essential infrastructure system. Besides, authorities strengthen inspection and supervision of the use of loans to ensure efficiency and compliance with the regulations.

Other directions focus on the restructuring of public debt towards increasing proportion of long-term loans at low interest rates, strict control of the repayment ability of loans that are guaranteed by the Government and full collection of debts from on-lending loans. Functional agencies are required to allocate resources from the state budget within the limits and use the budget to accumulate funds to pay debts, to review and fulfil amendments and supplement of the State Budget Law, the Law on Public Debt Management, and the medium-term public debt management programme. Such programmes aim to cut public debt indicators over the period 2016 and 2020 to ensure the national financial security.

 

Regarding bad debts, the State Bank of Vietnam, credit institutions and the business community at all levels have made great efforts to deal with bad debts. Agencies are actively implementing debt-settlement plans associated with the restructuring of credit institutions.

 

In addition, authorities are focusing on monitoring, inspecting, and reviewing safety rules of the operation, asset quality, financial conditions, and results of bad debts, simultaneously improving regulations on debt restructuring, loan classification, and proposing transparent and consistent risk management plans in accordance with international practices. Till October 2014, 54.3 percent of total NPLs were handled. NPL ratio as reported by credit institutions is at around 3.8 percent and it tends to decrease. In the coming time, the government is directing agencies to accelerate write-offs of the debts associated with the restructuring of credit institutions by completing legal framework, especially the handling of security assets and rights limit of creditors, fulfilling functions, enhancing financial resources, capacity building and promoting role of the Vietnam Asset Management Company (VAMC), developing debt trading market, encouraging domestic and foreign investment companies to buy bad debts, disclosing information of bad debts and credit quality, strengthening inspection and supervision of bad debt, credit quality and improving coordination between the ministries, branches and localities in handling bad debts.

Along with the above solutions, the Government will focus on policies to ensure a stable macroeconomic environment, a healthy development of the stock market and real estate and promotion of economic restructuring to boost economic growth, handle bad debt and restructure credit institutions. This aims to decrease bad debt ratio to about 3 percent at the end of 2015.