Public debt increases in Vietnam while decreasing in other Asean countries

11-Nov-2017 Intellasia | | 6:00 AM Print This Post

In the study entitled “Assessing Law on public debt management in Vietnam and some policy implications” publicised on November 7, Dr Nguyen Duc Thanh, Nguyen Hoang Ngoc (Institute for Economic and Policy Research VEPR) pointed some worth concerning issues about Vietnam’s public debt.

As per the research team, public debt in Vietnam is one of the issues that have drawn attention in recent economic forums.

With such a developing country like Vietnam, borrowing can be considered as a necessary tool for financing, meeting investment demand and encouraging production development in the period that the economy has low accumulation.

However, if we abuse the lending and use this source of finance recklessly, debts will become a future burden, causing the stability of the economy to be threatened.

Vietnam’s public debt/GDP in recent years tends to increase rapidly, especially since 2011. Specifically, only within five years from 2011 to 2015, Vietnam’s public debt/GDP increased about 12.2 percentage points from 50 percent to 62.2 percent.

As of the end of 2016, public debt was estimated to reach 63.7 percent GDP. With the consecutive increase of about five percent per year as in 2011-2016, the public debt ceiling of 65 percent GDP set by the National Assembly can be broken in the near future.

Quoting the data of the International Monetary Fund (IMF), the research group showed that Vietnam’s public debt is much higher than that of Thailand, Indonesia, the Philippines, Malaysia, Laos and Cambodia.

Notably, bad debt of many Asean countries tends to decrease while Vietnam’s has increased steadily.

Data of the Ministry of Finance show that Vietnam’s public debt swelled about nearly 300 trillion dong each year.

“Comparing to remaining Asean countries as well as emerging and developed countries in the world, Vietnam’s public debt/GDP has increased strongly, from the lowest position in 2000-2005 to the leading position in 2016″, said the research team.

With the current increasing trend in scale and risks, public debt management is one of the issues of biggest concerns for policy makers, academics and the public in Vietnam.

In that context, the draft revised Law on public debt management has been worked out to supplement, adjust and overcome the limitations of the current law.

The group of authors said that there needs to ensure the consistency between the Law on public debt management and the Law on state budget (issued in 2015 and took effect since 2017), and the Law on public investment (issued in 2014 and took effect since 2015).

Besides, there also needs to ensure the consistency of this law and the Law on enterprises (including state-owned businesses) and the Law on state bank.

In addition, there need to improve statistics, management and disclosure of public debt towards increasing publicity, transparency, systemativity, completeness, honesty, objectivity, accuracy and updating.

Especially, it is required to have specific regulations about the format of public debt statistics reports, time limit for information disclosure, and updating of published data in order to create favourable conditions for the bad debt management and evaluation process.

Good practice in the world shows that the legal framework should regulate that the debt management jurisdiction only belongs to one agency, which is normally one unit under the Ministry of Finance, in order to avoid the disperse and enhance the cooperation in the debt management.

Specifically, this agency will be responsible for explaining public debt from negotiation, borrowing, managing, using debt to paying debt, thereby increasing the consistency and efficiency in the debt management, facilitating the reduction of administrative procedures and apparatus simplification.

Finally, for government guaranteed risk management, there should have a mechanism for monitoring and minimising the budgetary situation or debt repayment or debt guarantee for self-repaying loans of state-owned businesses when they go bankrupt. There also needs to take measures to tighten debt guarantee and increase transparency and publicity in the debt guarantee.


Category: Economy, Vietnam

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