Vietnam raises debt ceiling

By VnExpress   November 10, 2016 | 03:34 am PT
Lawmakers overwhelmingly approved the increase to the government debt ceiling.

Vietnam's National Assembly passed a resolution, on Wednesday, raising the country's government debt ceiling.

The resolution raised the ratio of Vietnam's government debt from 50 to 54 percent of gross domestic product (GDP), instead of 55 percent proposed last month. 

Government debt, so far, has already touched 53.2 percent of GDP. 

The country’s foreign debt repayment obligation has been set to less than 25 percent of the country's total trade revenue, while the government’s direct debt repayment won't exceed 25 percent of its annual budget revenue.

The National Assembly set a number of key targets for the next five years. These include an ambitious revenue target of about VND6,846 trillion ($306.51 billion) and unchanged ceilings on public debt at 65 percent of GDP and foreign debt at 50 percent.

Official statistics produced at the end of 2015 showed Vietnam’s public debt exceeded VND2,680 trillion or $119.9 billion, equal to 62.2 percent of GDP.

Outspoken members of the National Assembly have warned that Vietnam may exceed its ceiling for public debt in the second half of the year.

The resolution projects that total spending will approach VND8,025 trillion ($360 billion) -- a quarter of which will go to development projects. The country will prioritize the repayment of its debts and replenishing its national reserves.

Vietnam's public debt hit 52 percent of GDP in 2010 when the State Treasury launched a campaign to sell 31 trillion dong ($1.4 billion) worth of bonds on the domestic market between October and December, raising the total value of oustanding bonds to 281 trillion dong from the limit of 250 trillion dong set at the start of the year.

Falling revenues from crude oil and other raw material exports have exacerbated the country's need for cash, in recent years.

Government statistics show that crude oil revenues made up 30 percent of the nation’s budget in 2005, 20 percent in 2010 and about 10 percent in 2015. Crude oil revenues continued to fall sharply in the first four months of this year posting a drop of about 48.1 percent from the same period last year.

On the other hand, Vietnam has taken several measures to reverse rising foreign debt by seeking to mobilize long term loans from local investors. Last year, in an attempt to mitigate risk, Vietnamese lawmakers expanded the maturation of government bonds.

The State Treasury, which holds weekly bond auctions at the Hanoi Stock Exchange, reported that bonds with terms of five years or more now make up 46 percent of Vietnam's total outstanding debt.

Meanwhile, increasing pressure to keep GDP growth on target and infrastructure development needs are pushing for more government spending.

Vietnam has revised this year's GDP growth target from 6.7 percent to 6.2-6.5 percent following sluggish performance in the first half due to adverse weather conditions. Still, the country is aiming for 6.7 percent GDP growth in 2017 while capping inflation at 4 percent.

Related news:

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

> Vietnamese lawmakers deny debt ceiling increase, insist gov't control spending

 
go to top