Vietnam’s increasing foreign debts a cause for worry

By Anh Minh, Dat Nguyen   October 30, 2018 | 10:00 pm PT
Vietnam’s increasing foreign debts a cause for worry
An employee count U.S. dollar and Vietnam dong banknotes at a bank in Hanoi. Photo by Reuters/Kham
Vietnam’s rising foreign debt in recent years is affecting its credibility and making borrowing harder, officials and economists warn.

In a recent report to the National Assembly (NA), the government said foreign debt is currently 49.7 percent of GDP, within touching distance of the cap it has set of 50 percent.

It has increased from last year’s 45.2 percent, and the government expects it to rise to 49.9 percent next year, the report said.

The debt figure is comprised of government debts, government-guaranteed debts and companies’ debts.

“Companies’ debts account for half of total national debts and have been increasing rapidly,” Minister of Finance Dinh Tien Dung said at the NA meeting on Monday.

They increased by 42 percent last year, partly because of the $4.8-billion loan Thai Beverage (ThaiBev) took to acquire Vietnam’s largest brewery, Saigon Beer Alcohol Beverage Corp (Sabeco).

Since ThaiBev borrowed the money from a Thai bank through its subsidiary VietBev, the loan is considered part of Vietnam’s foreign debt.

Analysts warn Vietnam’s credibility would take a hit if foreign debts continue to climb.

Economist Nguyen Tri Hieu said the country’s rating by Fitch Ratings has been at “non-investment grade speculative” for years, and debt is one of the reasons.

“The low rating means Vietnamese businesses bear higher interest rates and have difficulty getting credit,” he told VnExpress International.

To increase its rating to “investment grade,” Vietnam needs to contain its debts, he said.

Hoang Quang Ham, a member of the NA Finance and Budget Committee, said if the debt surpasses the 50 percent GDP cap, the country’s credibility would be affected.

For this reason, the government needs to monitor and control companies’ borrowings and reduce guaranteeing them, he added.

Companies and credit institutions’ foreign loans this year are capped at a total of $5 billion, the Ministry of Finance said.

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