VINACHEM

The nation’s foreign debts had reached VND2,451,978 billion as shown in the government’s report to the National Assembly on using loans and managing public debts as of the end of December 2017.

With the official exchange rate of VND22,425 per dollar announced by the State Bank of Vietnam (SBV) on the last day of the last year, Vietnam’s total foreign debts had reached $109.34 billion.

As such, the nation’s foreign debt increased rapidly. The Public Debt Bulletin No 5 issued on August 23, 2017 showed Vietnam’s foreign debts by the end of 2015 was $80.84 billion, while it was $71 billion in 2014. This means that the foreign debt increased $10 billion year on year. Meanwhile, in 2016-2017, the average increase was $15 billion a year.

In previous years, the concern about risks caused by exchange rate fluctuations did not exist, because the dong/dollar rate was stable.

As the dong is losing value against the US dollar, Vietnam’s foreign debts are getting bigger. According to Thoi Bao Kinh Te Saigon, the amount of money the state budget has to pay additionally for principal and interest this year could be trillions of dong because of the exchange rate fluctuations.

The foreign debts incurred by businesses are an important part of the nation’s foreign debts. However, the Ministry of Finance (MOF) doesn’t show figures about foreign loans provided to Vietnam’s businesses.

Under the 2018 plan, the foreign loan limit for businesses and organizations is $5 billion, and businesses’ short-term outstanding loans must not surpass outstanding loans by December 31, 2017.

An SBV official said FIEs have the highest demand for foreign loans. They borrow money either from holding companies or foreign banks.

In principle, enterprises have to register borrowing with the Forex Management Department. If the total loans registered by enterprises are higher than limits, SBV will discuss with MOF to adjust limits based on demand and debt payment capability.

This disbursement was low because of slow capital use and slow disbursement process.

FIEs prefer foreign loans to domestic loans because the lending interest rates are lower, while conditions are more flexible.

In 2017, Vietnam Beverage borrowed $5 billion to buy Sabeco shares, which led to the increase in the total foreign debts of the nation. If the company had not received the loan, Vietnam’s total foreign debts would have been $104.34 billion by the end of 2017.

Under the Public Debt Management Law, the nation’s foreign debts include foreign debts incurred by the government, foreign loans guaranteed by the government and foreign loans to enterprises. - VNN -