Moody's reasoning on Vietnam downgrade 'inappropriate,' ministry says

By Dat Nguyen   October 11, 2019 | 01:19 am PT
Moody's reasoning on Vietnam downgrade 'inappropriate,' ministry says
Workers arrange a steel structure in Hanoi. Photo by Reuters/Kham.
The Finance Ministry says downgrading Vietnam’s rating because of a delayed debt repayment is inappropriate as the government's a guarantor, not a borrower.

The ministry said in a statement Thursday that the debt obligation mentioned by credit rating agency Moody’s is a government-guaranteed one, which is part of the government’s contingent, not direct liabilities.

The Vietnamese government has fulfilled its responsibility as a guarantor for this payment, even before the creditor made an official request for the government to do so, it said.

"The Vietnamese government has never been late in fulfilling its debt repayment obligations."

Moody’s announcement is unconvincing as it has focused on a single incident but ignored the efforts that the Vietnamese government has made and results it has obtained in maintaining macroeconomic stability, the ministry said.

The announcement by Moody’s could cause misunderstanding among investors and could affect Vietnam’s reputation, it added.

The ministry’s statement is a response to Moody’s Wednesday statement that it was reviewing Vietnam’s Ba3 rating after the government delayed a debt repayment.

Although there were "no or minimal losses to creditors", the delay suggests institutional weaknesses and coordination gaps within Vietnam’s administration "pointing to creditworthiness that may no longer be consistent with a Ba3 rating," it said.

World Bank Vietnam chief economist Jacques Morisset said that the repayment delay does not mean Vietnam is short on its budget.

The country’s reserves are higher than the target and last year’s spending has declined, he told VnExpress.

The key issue is a lack of coordination between government bodies, which is something Vietnam needs to improve, he added.

Latest figures from the Ministry of Finance estimates public debt at the end of 2018 at 58.4 percent of GDP, or VND3,200 trillion ($136.75) billion, the lowest since 2015, and well below the 63.9 percent target set by the Ministry of Planning and Investment last August.

But National Assembly delegates warned in June that Vietnam might need to borrow around VND700 trillion ($30 billion) over three years to service its debts since repayment pressure was rising.

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