Vietnam sets ambitious bond target of $11 billion for 2017

By VnExpress   January 21, 2017 | 01:06 am PT
Vietnam sets ambitious bond target of $11 billion for 2017
Women count money at a bank in Ho Chi Minh City, Vietnam, January 10, 2017. Photo by Reuters
The government it looking more to the local debt market to finance its operations.

The Ministry of Finance has announced a target of raising VND250 trillion ($11 billion) via bond sales this year.

Vietnam has classified public debt into three main categories: government, government-guaranteed and local government debt.

This year, the country will try to sell as much as VND34.4 trillion in government-guaranteed bonds, VND8–10 trillion in debts issued by cities and provinces, and more than VND200 trillion via the State Treasury’s government bond auctions on the Hanoi Stock Exchange.

Vietnam is increasingly turning to local debt markets to counterweight its heavy dependence on external sources. This year, the State Treasury, which holds weekly bond auctions in Hanoi, will offer more long-term bonds and cut the number of short-term bonds so that the proportion of bonds with tenures of between 5 and 10 years will increase to 60 percent of the total debt.

Last year, the State Treasury raised VND287.75 trillion ($12.4 billion) via government bond sales, a 26.85 percent jump from the year before, official data showed, marking the strongest demand ever from local investors.

According to the Finance Ministry, last year the government offered Vietnamese dong-denominated bonds with an average maturity of 5.61 years, paying an average yield of 8.72 percent per year.

The bond market has grown quickly. As of the end of last year, government bond sales had hit a record high of about 26 percent of GDP, according to the State Treasury.

Vietnam’s budget deficit remains high at around 6 percent of GDP. As a result, public debt is now close to the warning line set by the parliament of 65 percent of GDP.

Although much of this debt is in the form of long-term development assistance loans, Vietnam is gradually shifting towards domestic sources to meet its financing needs, cutting overseas loans as a percentage of total debts significantly to 43 percent in 2015 from 61 percent in 2011.

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