VINACHEM

Despite Vietnam's nominally modest debt ratio, the country is having trouble mobilizing funds to pay off its obligations, the Ministry of Finance said in a report presented to the legislature’s economic committee.

By the end of the first quarter of 2014, the government had sold VND83.014 trillion (US$3.93 billion) worth of bonds, or 35.8 percent of this year’s target, Tuoi Tre (Youth) newspaper reported Monday.

The government plans to sell another VND80-100 trillion ($3.79-4.75 billion) over the next quarter, but the sale will prove difficult as commercial banks are shifting their focus toward boosting credit growth, the ministry said.

The National Assembly, Vietnam's legislature, approved the government's plan to issue additional VND170 trillion ($8 billion) worth of additional bonds from 2014-16. These bonds come on top of the VND75 trillion ($3.56 billion) already approved for issuance as part of a five-year plan that began in 2011.

Vietnam’s public debt was estimated at 53.5 percent of its GDP last year, Nguyen Thanh Do, director of the ministry’s Department for Debts and Foreign Finance Management, told Tuoi Tre.

The ministry’s report has once again alarmed local economists.

Le Dang Doanh, former director of the Central Institute for Economic Management, told the newspaper that Vietnam is keeps taking out new loans to pay its old debts.

This year alone the government planned to spend up to VND70 trillion ($3.32 billion), or over 30 percent of its bond fund, to pay old debts, he said.

The state's income isn't enough to cover its spending, Doanh said.

“The Vietnamese government is having great difficulties paying its debt,” he said.

Tran Dinh Thien, director of the Vietnam Institute of Economics, also said Vietnam is under high pressure to pay off its debts given that a majority of its loans are short-term.

He said his agency’s statistics showed that this year Vietnam is due to pay back VND208 trillion ($9.87 billion) in debts, or 26.7 percent of state's income this year, exceeding the limit set at 25 percent.

He also pointed out that the government has calculated its public debt incorrectly by excluding money owed by state-owned enterprises.

Many Vietnamese economists believed that if the government had followed international accounting standards, Vietnam’s public debt would far exceed the ceiling set at 65 percent of GDP.