Vietnam's foreign debt remains manageable despite low disbursement rates
The disbursement rate for foreign-funded projects in Vietnam has reached only 24.33% of the Prime Minister's target in the first nine months of 2024.
According to the government's report on public debt in 2024, it is projected that by the end of this year, the national foreign debt will be approximately 32-33% of GDP, significantly lower than the ceiling of 50% set by Resolution 23 of the National Assembly.
Loans from ODA (Official Development Assistance) and preferential loans from foreign donors amount to about 31.28 trillion VND ($1.33 billion), with loans for relending estimated at 10.745 trillion VND ($457.2 million).
The foreign loans being disbursed are mainly those previously signed by the government with long tenors and low interest rates (the weighted average interest rate of the current foreign loan portfolio is around 1.9% per year).
In the first nine months of the year, the government signed ODA and preferential foreign loans with a total value of 638.8 million USD. It is expected that in 2024, negotiations will be completed for 14 agreements on ODA and preferential foreign loans with a total value of 1.5 billion USD.
However, the cost of foreign borrowing is higher than the average domestic borrowing cost. The interest rates from the two largest multilateral organizations (the World Bank and ADB) range from 5.91% to 6.5% per year.
The disbursement rate of foreign capital projects in the first nine months is estimated to have only reached 24.33% of the plan set by the Prime Minister.
The primary reason is that the legal system is still under development, and issues related to public investment and bidding have not been thoroughly resolved, while there is pressure from donors to apply international standards.
It is projected that by the end of 2025, the public debt will remain at around 36-37% of GDP, like the level in 2024; government debt will be 34-35% of GDP (compared to 33-34% of GDP in 2024); and national foreign debt will be around 33-34% of GDP (up from 32-33% in 2024). – Source: VNN –