Borrowing costs from foreign sources surpass domestic lending
In the recent report sent by the Government to the National Assembly, it was ported that borrowing costs from foreign sources surpass domestic lending.
In its report, the government said that the public debt as a percentage of GDP is estimated to be between 36 percent and 37 percent. Additionally, the government debt is reported to be between 33 percent and 34 percent of the GDP, while the foreign debt of the country as a percentage of the GDP is between 32 percent and 33 percent.
The direct debt repayment obligation of the Government is estimated to be between 21 percent and 22 percent of the state budget revenue, and the foreign debt repayment obligation of the country is reported to be between 8 percent and 9 percent of the export turnover.
Consequently, debt indicators by the end of 2024 are foreseen to remain below both the ceiling and the safety warning threshold set by the National Assembly.
In term of structure, domestic debt constitutes approximately 76 percent of the total government debt, predominantly in the form of government bonds. In contrast, foreign debt is estimated to represent around 24 percent of the overall government debt, with primary creditors including bilateral and multilateral development partners such as Japan, Korea, the World Bank, and the Asian Development Bank. The majority of foreign debt consists of Official Development Assistance (ODA) loans, which are long-term preferential loans secured at favorable interest rates.
The Government's debt repayment in 2024 will be fully implemented as committed, within the budget approved by competent authorities.
The public debt of Vietnam is projected to reach 36 percent-37 percent of GDP by the end of 2025. This consists of government debt at 34 percent-35 percent, foreign debt at 33 percent-34 percent, and a direct debt repayment obligation for the government of 24 percent of budget revenue.
In 2025, the government's total borrowing demand is estimated to be VND 815,238 billion, which is a 20.6 percent increase from their borrowing plan in 2024. Out of this, VND 804,242 billion will be borrowed from the central budget to cover the budget deficit and repay principal, representing a 21.9 percent increase compared to the 2024 estimate. The remaining amount will be borrowed from foreign sources for re-lending.
The government's direct debt repayment obligation is expected to be around VND 468,542 billion, with VND 361,142 billion allocated for principal repayment and VND 107,400 billion for interest repayment.
Upon evaluating the situation, the Government has acknowledged certain constraints. For instance, foreign borrowing costs currently exceed the average domestic borrowing costs, presenting risks of exchange rate fluctuations between foreign and domestic currencies.
Additionally, the disbursement of foreign capital for public investment remains low. The estimated disbursement of public investment capital in the first nine months of 2024 nationwide reached 47.29 percent of the plan, with foreign capital disbursement accounting for only 24.33 percent of the plan.
The above mentioned limitations stem mainly from subjective factors. These factors are related to public investment and not fully addressed bidding. Meanwhile, it is imperative to ensure strict adherence to domestic laws in loan agreements. – Source: SGGP –