Vietnam’s public debt to exceed 80pct of GDP with SOEs’ included

Late July, the strategy on public debt and foreign debts 2011-2020 and orientation towards 2030 was approved. government debt and national foreign debts, as such, would not account for above 50pct and 45pct of GDP respectively, which would require proper risk management of public debt, said director of the Institute of Public Policy and Management, National Economics University Dr Pham The Anh.

Public debt-to-GDP ratio slightly declined to 54.6pct by the end of 2011 largely due to soaring inflation that drove up GDP value, of which foreign debts made up 31.1pct of GDP. Fortunately, the above figures are well below the safety boundaries of such international organisations as the World Bank (WB) and International Monetary Fund (IMF).

However, potential threats would stem from state-owned enterprises (SOEs) which usually enjoy exclusive privileges such as capital supplement, debt extension, debt write-off, debt transfer and the like; he said citing notable names like Vinashin, Vinalines and Song DA Corporation. In such circumstances, overspending would come in order to make up for the expenses of this sector, thus placing further burdens on the state budget.

In addition, SOEs’ total outstanding credit climbed to16.5pct of GDP, which, if included, would drive up public debt-to-GDP ratio to as much as 80pct.

Therefore, it is very likely that the state budget would be deployed with a view to tackling SEOs’ bad debts, which would much hurt the public debt sustainability. Therefore, SOEs’ debts had better be an integral part to be included in the strategy on public debts.

 

Category: Economy