Vietnam mulls ending government guaranteed loans to restrain public debt

By Toan Dao   July 6, 2016 | 08:02 am GMT+7

Most government guaranteed loans for projects during 2010-2015 are sought from foreign countries.

Vietnam’s Ministry of Finance has proposed the central government to put an end to government guarantee for new projects from 2017 in an effort to help lower the burden on the nation’s public debt, the Vietnamplus cited a ministry report as saying July 5.

The World Bank forecasts that Vietnam’s public debt will climb from 62.2 percent of gross domestic product (GDP) in 2015 to 63.8 percent in 2016, 64.4 percent in 2017 and 64.7 percent in 2018.

Vietnam’s National Assembly has set a ceiling for the country’s public debt at 65 percent of GDP.

The government-guaranteed loans as of end-2015 stood at VND459 trillion ($20.3 billion), equal to around 17.6 percent of the country’s public debt and accounting for 11.1 percent of GDP, the report said.

In particular, the government granted guarantee for loans worth $15.6 billion for 35 programs and projects during 2011-2015 with foreign loans accounting for $14 billion or around 90 percent of the total. The 2011-2015 figure is nearly three times higher than the $5.75 billion during 2007-2010.

By stopping government guarantee for projects from next year, the Ministry of Finance expects to keep government-guaranteed loans at 15.6 percent of public debt or 10 percent of GDP by 2020, according to the daily.

Cat Linh- Ha Dong Urban Railway Project in Hanoi. Photo by VnExpress/Ba Do

Cat Linh - Ha Dong Urban Railway Project in Hanoi. Photo by VnExpress/Ba Do

The ministry also asked the central government to look carefully into new projects which need government-guaranteed loans before giving approval for them this year.

Government-guaranteed loans are often allocated for infrastructure projects, such as Can Tho Bridge in Vinh Long Province (VND4.8 trillion), Nhat Tan Bridge in Hanoi (VND13.6 trillion), Cat Linh - Ha Dong Urban Railway Project in Hanoi ($868 million), and Ben Thanh-Suoi Tien Urban Railway Project in Ho Chi Minh City (VND47.3 trillion).

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