VINACHEM

Public debt indicators were under strict control and fell within the permissible limits set by the National Assembly’s Resolutions as of the end of 2018, according to the Finance Ministry.

At a press conference on public debt last Friday, the ministry said the Government had mobilised VNĐ250.5 trillion (US$10.7 billion) from domestic sources, mostly through bonds, to make up for the central budget’s overspending and to pay debts, meeting 90.8 per cent of its plans and accounting for 78.6 per cent of Government debt during 2018.

As for foreign debt, around $3.01 billion of Official Development Assistance capital and concessional foreign loans taken by the Government was disbursed, making up 21.4 per cent of Government debt.

The ratio of public debt to GDP was estimated at 58.4 per cent, lower than the target of 65 per cent, and the ratio of Government debt to GDP was around 50 per cent, while the target was under 54 per cent. The rate of national foreign debt to GDP was estimated at 46 per cent, while the target was under 50 per cent.

Võ Hữu Hiển, deputy director of the Finance Ministry’s Department of Debt Management and External Finance, said the fulfilment of targets was attributable to an 11-year high GDP growth rate, good fiscal policy management, budget collection surpassing estimates by 7.8 per cent, and budget overspending 3.7 per cent lower than estimated.

At the same time, slower-than-expected disbursement of ODA and foreign loans, along with good control of foreign exchange rates, helped reduce foreign debt. The strict control of Government-guaranteed foreign loans also contributed to reducing total Government-backed foreign debt.

However, the ministry noted that 32.7 per cent of the Government’s domestic debt would be due from 2019 to 2021, which would impact the allocation of funding for debt payment from the State budget.

ODA loans were expected to decrease and finally end in the next five years, resulting in a shortage of preferential long-term credit resources for investment. To compensate, the Government should take out new loans at less preferential conditions, thus interest rate-associated risks would increase.

Nevertheless, the average interest rate on the Government’s external debt remained low (around 2 per cent per annum) as more than 96 per cent of loans were ODA or concessional loans, which was an important factor helping keep the debt payment to budget collection rate within a safe limit, according to the Finance Ministry. — VNS