Vietnam Strengthens Foreign Debt Management

The Ministry of Finance (MoF) will strengthen management of foreign debts, considering it as one of the measures to revamp management in the upcoming time, the national financial conference was told on November 26.

 

MoF reported the 2007 budget deficit is estimated at VND56.5 trillion (US$3.5 billion), or 5 per cent of GDP which had also been approved by the National Assembly.

 

Additionally, the government debt by December 31, 2007 is estimated at 37.3 per cent of GDP; the nation’s foreign debt 31 per cent. According to MoF, these figures are within the safe threshold under international rules.

 

In the forthcoming time, the government will continue issuing international bonds, guaranteeing domestic businesses to borrow foreign loans together with new and stricter management regions.

 

Regarding official development assistance (ODA), MoF said it would reject allocating loans to unnecessary and ineffective projects. By the end of 2005, the government signed an agreement borrowing ODA capital worth US$22 billion, half of which has been disbursed.

 

According to MoF, enterprises will be able to access foreign loans with guarantee from the government more easily, and opportunities are open for all economic sectors, not only for state owned enterprises as previously. However, enterprises will have to meet higher standards to be eligible for guarantees by the government. Especially, enterprises must prove their solvency. The government will only guarantee loans of $10 million and more.

 

MoF is drafting important legal documents regulating the borrowing and management of foreign debts. An ordinance on debt management for the public sector will be compiled and promulgated. A government decree, regulating the issuance of government bonds in the international market will also be enacted.

 

MoF is planning a medium term program on borrowing and paying foreign debts, a program on corporate debt management, and a system allowing them to warn about the risks in borrowing and paying debt.

 

The Vietnamese government will set aside VND49.16 trillion ($3.062 billion) to pay debts next year, according to the newly-approved Resolution on Central Budget Allocation 2007. Out of the VND49.16 trillion, the government will spend VND37.99 trillion paying domestic loans, VND10.4 trillion for foreign loans and VND770 billion for aid.