Vietnam's public debt increases nearly 15 times over past 15 years

By VnExpress   November 2, 2016 | 02:45 pm GMT+7
Vietnam's public debt increases nearly 15 times over past 15 years
A worker works at an assembly plant at Pha Rung shipyard in Vietnam's port city of Hai Phong, east of Hanoi October 4, 2016. Photo by Reuters/Kham

Plunging oil prices have taken their toll on the government's coffers.

Vietnam’s public debt increased almost 15 times from 2001 to 2015 from $8.1 billion to $120 billion, said Finance Minister Dinh Tien Dung.

“Public debt in the past five years has climbed 18.4 percent on average and three times faster than economic growth,” said the minister on Tuesday at a parliament meeting.

Official statistics show that as of the end of 2015, Vietnam’s total debt was more than VND2,680 trillion or $119.9 billion, equal to 62.2 percent of gross domestic product and close to the limit of 65 percent set by parliament.

Vietnam's rising debt is due to declines in state revenue from crude oil and other raw material exports, said Dung.

Slumping crude oil prices have cut revenue from oil considerably. Government statistics show that crude-related revenue, which made up 30 percent of the nation’s budget in 2005, fell to 20 percent in 2010 and accounted for about 10 percent in 2015.

Revenue from oil in the first four months of this year fell sharply by 48.1 percent from the same period last year.

He also blamed the sluggish privatization of the state-owned sector for inherent inefficient use of public funds.

The minister said Vietnam’s public debt has piled up significantly in recent years, mainly in order to service its debt obligations.

Data show in 2015 the government spent VND125 trillion, equivalent to 3 percent of the annual GDP and up 18 percent from the previous year, to pay back debts and meet obligations.

Vietnam has taken several measures to reverse rising foreign debt such as shifting towards local markets to seek loans with longer terms.

Last year, in an attempt to mitigate the risks of debt repayments, Vietnamese lawmakers set new rules for the local debt market.

Under the new rule, the State Treasury, which holds weekly bond auctions at the Hanoi Stock Exchange, is offering more long-term bonds and cut the trading volume of short-term bonds so that the proportion of bonds with tenures of five years or more will increase to 46 percent of the total outstanding debt.

Statistics show from 2011 to 2013, the Vietnamese government mainly sold bonds with terms of less than three years. It has gradually extended the maturity from three years in 2014 to 4.4 years in 2015 and to five years in the first half of 2016. Bond yields fell from 12 percent in 2011 to around 6 percent in 2015.

And as a percentage of the total outstanding government debt, domestic debt rose from 39 percent in 2011 to 57 percent in 2015, said Vo Huu Hien, deputy head of the Department of Debt Management and External Finance.

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