IFC Considers Issuing Dong-linked International Bonds

The State Bank of Vietnam (SBV) and IFC have organized a workshop discussing the proposal to issue dong-linked international bonds, named Bong Sen (Lotus).

According to IFC’s vice president Nena Stoiljkovic, the bonds will be traded in US dollars on the international market. The proceeds from the first issuance (estimated at $100 million) will be converted into Vietnam dong in the forex market and will be used to carry out investment activities in Vietnam.

The vice president said the institution is capable of creating a catalytic market for foreign capital to flow into the domestic private sector. Investors, including foreign wealth funds and central banks, could be typical clients of the bonds. 

As IFC’s Bong Sen bond attracts foreign investors, it will help lure more foreign investment into Vietnam’s capital market.

Bong Sen will also allow foreign investors easier access to Vietnam dong investment items and invite them to diversify their investment portfolios.

SBV deputy governor Nguyen Thi Hong said there is huge capital demand for economic development.  

Vietnam has stopped IDA borrowing (International Development Association) from the World Bank and is going to stop ADF (Asian Development Fund) borrowing from the Asian Development Bank, while domestic resources remain limited. 

The IFC’s new financial tool is expected to be a useful channel for calling for capital to implement economic development plans initiated by the government.

According to Hong, after hearing presentations about the bond issuance plan, some units of the central bank have given replied about the plan. 

Prior to that, the plan on issuing $3 billion worth of international bonds to restructure domestic debts was put into discussion at the National Assembly’s sessions.

Tran Du Lich, an economist, said the bond issuance will bring three benefits. First, it will help restructure long-term debts. Second, Vietnam will promptly have a big amount of foreign currencies for use, while payments will be made for a long time, which will not create pressure on the forex market. And third, the bond issuance will show the credit rating for Vietnam regularly in the international market.

Huynh The Du, an economist, thinks issuing international bonds is proper, but said the issuance and interest rates must be thoroughly considered.

Meanwhile, deputy chair of the Vietnam Association of Financial Investors (VAFI) Hoang Hai believes that Vietnam should take full advantage of domestic resources before thinking of seeking foreign capital. 

“Domestic capital is abundant at this moment and private capital is plentiful,” he said.

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