Sending report on the use and management of public debts in 2017 and the plan in 2018, the government stated that the task of mobilising government loans for balancing the central budget in 2018 is 341.770 trillion dong, including the borrowings to offset the central budget deficit (195 trillion dong, equivalent to 3.54 percent of the Gross Domestic Product (GDP)), and borrowings to repay the principal debts of the central budget (146.770 trillion dong). About 1.850 million USD (equivalent to 42.230 trillion dong) of foreign loans are estimated to be withdrawn for re-lending in 2018.
The government debt repayment obligation in 2018 is about 275.330 trillion dong, including the obligation to repay domestic debts valued at 216.654 trillion dong (principal debts of 116.655 trillion dong and interests of 99.909 trillion dong) and the obligation to repay the debts relent from government’s foreign loans valued at approximately 18.560 trillion dong (including principal debts of 12.939 trillion dong and interests of 10.091 trillion dong).
The source to repay debts of the government includes the arrangement in the central budget to pay interests (110 trillion dong) and new borrowings to repay principal debts (146.770 trillion dong).
The accumulation fund and the units re-borrow the loans shall directly make repayment for the debts relent from government’s foreign loans which are valued at approximately 18.560 trillion dong.
Notably, the report clearly stated the direction of the government’s guarantee limit in 2018 and the following years. Accordingly, the government will minimise granting guarantees for the new loans. For the two policy banks, the new guarantee limit is equal to the annual debt repayment obligation.
With this direction, the guarantee limit for bond issuance of the Bank for Social Policies is 9.670 trillion dong, and that of the Vietnam Development Bank is 24.430 trillion dong (equalling to the principal debts of bonds mature in the year).
The limit for foreign commercial borrowings guaranteed by the government in 2018 is 700 million USD.
The limit for net domestic borrowings guaranteed by the government in 2018 for the programmes and projects that have been guaranteed by the government in the past is up to two trillion dong.
The borrowing plan of localities in 2018 is 21.513,9 trillion dong (including domestic borrowings (8.769,6 trillion dong) and re-borrowing from the government’s foreign loans (12.744,3 trillion dong)).
According to the report, to ensure the safety of national foreign debts, the maximum annual limit of medium and long-term foreign borrowings is 5.5 billion USD (net withdrawal), and the annual increase of short-term foreign borrowings is 8-10 percent.
By December 31st 2017, the national foreign debt ratio was 49 percent of GDP, close to the national foreign debt limit approved by the National Assembly (50 percent of GDP).
According to the government, if following the limit approved in Decision 544/QD-TTg (with the solution to control disbursement rate, which is to keep the maximum annual limit of medium and long-term foreign borrowings in the form of self-borrowing and self-repaying at 5.5 billion USD (net withdrawal), and annual increase of short-term foreign borrowings at 8-10 percent), the ratio of national foreign debts on GDP in 2018 is estimated at 50.9 percent of GDP, exceeding the limit approved by the National Assembly.
Thus, to ensure the national foreign debt safety, the prime minister approved the maximum foreign commercial borrowings of enterprises and CIs in 2018 in the form of self-borrowing and self-repaying at five billion USD.
The outstanding short-term foreign debts by the end of 2018 of enterprises and CIs shall not exceed the outstanding balance at December 31st 2017.
With the above plan, the Ministry of Finance forecasted that by the end of 2018, the public debts will be about 61.4 percent of GDP, government debts will be about 51.9 percent of GDP and debts guaranteed by the government will be 8.8 percent of GDP, the report clearly stated.
Assessing the shortcomings in public debt management, the government emphasized some points that should be closely monitored and noted. Accordingly, the disbursement of Official Development Assistant (ODA) and foreign preferential loans of the government remains slow as the capital assignment to programmes and projects was not close to the progress of the projects. Many capital adjustment phases were assigned, causing many ministries, industries and investors to face difficulty in disbursing foreign loans.
In addition, the issuance of government bonds still focused on traditional bond products (fixed-rate bonds and annual interest payments) and there were no additional product to diversify the market.
Particularly, the short-term foreign loans of enterprises and credit institutions (CIs) in the form of self-borrowing and self-repaying increased sharply, reaching 21.9 billion USD in the end of 2017, up by 73 percent compared to 2016 (including the short-term foreign loan of Vietnam Beverage worth about five billion USD).
Meanwhile, under the Decision 544/QD-TTg of the prime minister which approved the medium and long-term loans in 2016-2018 period, the annual growth limit of short-term foreign loans is maximum 10 percent per annum.
The surge of short-term foreign loans (self-borrow and self-repay by enterprises and CIs) caused the national outstanding foreign loans compared to GDP in 2017 increased to 49 percent of GDP, close to the foreign loan limit of 50 percent stipulated in the resolutions of the National Assembly and decisions of the prime minister, affecting the safety ratio of national foreign debts and reducing the room to borrow foreign loans in the coming years, said the government.
Regarding solutions, the government promises to tightly control the foreign borrowings of enterprises (both short, medium and long terms) in the form of self-borrowing and self-repaying. There will be a comprehensive assessment of the borrowing and repayment in the form of self-borrowing and self-repaying of enterprises and CIs to actively reduce the outstanding foreign commercial loans of enterprises and CIs in the form of self-borrowing and self-repaying, especially short-term ones to ensure the national foreign debt limit within the approved level.
Category: Uncategorized
