Public debt has reached 95% of GDP?

Total public debt in 2012 was estimated at 55.4% of GDP. However, if you include the debt in the banking system of SOEs and other non-Government-guaranteed domestic bond debt, Vietnam's public debt is up to 95% of GDP, far exceeding the safe threshold of 60% of GDP.

In the research report "Public debt and sustainability in Vietnam", the Economic Committee said that by the end of 2011, Vietnam's total public debt was about 54.9% of GDP, of which foreign public debt was and domestic public debt are 30.9% and 24.0% of GDP, respectively. The corresponding figures for 2012 are 55.4% of GDP; 29.6% GDP and 25.8% GDP.

However, according to the Committee's comments, the biggest potential risk to Vietnam's public debt is probably not in the debts recorded on the books. The problem lies in the bad debts of the state-owned enterprises (SOEs) - which will most likely have to be paid by the state budget - which are the seeds that threaten the sustainability of Vietnam's public debt. Specifically, the external debt of the private sector, which is mainly SOEs, which is not guaranteed by the Government, accounts for 10.6% of GDP.

In addition, the debt in the banking system of the SOE sector as recorded in the SOE Restructuring project of the Ministry of Finance (2012) also accounts for approximately 16.5% of GDP. Taking these numbers into account and adding other SOEs' non-Government-guaranteed domestic bond debt, the Economic Commission said, Vietnam's public debt would amount to approximately 95% of GDP!

This rate is clearly far above the safe threshold (60% of GDP) recommended by international organizations such as the World Bank (World Bank) or the International Monetary Fund (IMF). At the same time, much higher than the rate published on the Economist's World Debt Watch.

Currently, by definition, total public debt is the domestic debt and the external debt of the public sector, including the debt of the central and local governments but excluding the debt of SOEs, including enterprises The State owns more than 50% of the capital. Only debts of SOEs guaranteed by the Government are included in the total public debt.

Foreign debt in local currency increased at breakneck speed

The Committee also noted that, although foreign debt may enjoy low interest rates, it is fraught with exchange rate risks. The devaluation of the local currency will increase the foreign debt burden in terms of local currency.

Major creditors of the Government of Vietnam include Japan (accounting for 34.3% of total debt) and international organizations such as IDA (24.9%) and ADB (15.0%). The US and the EU account for only 0.3% and nearly 6.9% of the total debt of the Government of Vietnam, respectively, but the debt in currencies of these countries/regions accounts for a large proportion.

According to the Committee's comments, creditors tend to use strong currencies, and borrowing in these strong currencies exposes foreign debt to high risk as they tend to appreciate over time.

Specifically, from the beginning of 2010 to the end of June 2011, three key currencies including EUR, USD and JPY in Vietnam's foreign debt basket have appreciated by 12%, 13% and 26% respectively. against VND. This also means that the foreign debt burden in terms of local currency is increasing at a rapid rate and puts pressure on the budget deficit and monetary policy.

The Economic Committee assessed that it is extremely difficult to access official and up-to-date information sources on public debt, foreign debt and debt of SOEs in Vietnam. The official source of information on Vietnam's external debt is currently provided only through the Foreign Debt Bulletin, which is released every six months by the Ministry of Finance. However, the latest bulletin only reflects the foreign debt statistics until the end of 2010.

Other statistics on domestic public debt and especially debt of SOEs are not published in detail and officially. The data of SOEs was collected and calculated by the research team of the Economic Committee based on the reports of the Ministry of Finance at the National Assembly sessions and the statistics of credit balance in the banking system of the State Bank.

Therefore, the Economic Committee believes that the first challenge in the management of Vietnam's public debt is to build a transparent and quick system to provide and manage public debt/foreign debt information. . This requires the proper recognition of managers and policy makers in Vietnam about the current public debt risk management issue.

According to Dan tri