Vietnam trying to rein in rising public debt: Finance minister

Vietnam’s public debt growth has slowed and will only rise by an estimated 9 percent this year compared to 15 percent last year, Minister of Finance Dinh Tien Dung said.

“Public debt has been closely controlled, and this is demonstrated by lower year-on growth,” Dung said at a  Q&A session with lawmakers on Thursday.

However, the minister also admitted that the country’s public debt remains high, creating significant repayment pressure.

Vietnam’s national debt had reached more than VND2,600 trillion ($116 billion) as of the end of 2015, equal to 62.2 percent of gross domestic product (GDP), said the country's Finance and Budget Commission in a report on the country’s debts and obligations for 2016-2020.

The government has gradually cut state budget overspending, aiming to ensure public debt safety, he said.

The government has set a target of keeping state budget overspending at 3.5 percent in 2017, 3.7 percent in 2018, 3.6 percent in 2019 and 3 percent in 2020.

In addition, it will continue to tighten loans issued with government guarantees, he said. “Last year, the government did not offer loan guarantees to any state-owned enterprises.” There are concerns that when a state-owned enterprise can’t repay its own debts, the government must step in and assume responsibility.

More than 100 major state-owned enterprises had borrowed a combined VND1,500 trillion ($67 billion) by the end of last year, with a large part owed to foreign creditors. These SOEs had borrowed $15.6 billion from overseas, of which more than 60 percent was either official development assistance loans at low interest rates or loans guaranteed by the government.

Speaking at the session, Deputy Prime Minister Vuong Dinh Hue said the government has taken control of guaranteed loans and will not to raise the public debt ceiling.

Some lawmakers and experts have suggested raising the government's debt ceiling to fund its budget obligations from the current 50 percent of GDP to 55 percent.

Vietnam’s government debt in 2015 rose above the maximum limit, totaling VND2,133 trillion ($95.6 billion) or 50.9 percent of GDP, according to the General Statistics Office.

The National Assembly, Vietnam's legislature, has also set a ceiling on public debt of 65 percent of GDP and a limit on foreign debt of 50 percent.

The World Bank forecasts that Vietnam’s public debt will climb to 63.8 percent of GDP this year and 64.4 percent next year.

The growing debt will impose a steadily increasing burden on the economy, and make it ever harder to cut the budget deficit, which hit 6.1 percent of GDP last year.