VietNamNet Bridge – A growing number of economists have expressed serious concerns about the state of Vietnam’s public debt. Their biggest worry: the rapid growth of government-guaranteed debt, now increasing at a 50 percent annual rate.

The latest National Assembly report on Vietnamese public debts disclosed that, as the Japanese yen depreciated by 28 percent in 2013, Vietnam’s foreign debts in yen automatically decreased by $3.1 billion, or VND65.1 trillion.

This helped reduce the public debt by 2.8 percent in comparison with the figure reported at the previous National Assembly session. By the end of 2013, the public debt had reached VND1,913 trillion, or 53.4 percent of GDP.

However, new loans from different sources, including the government’s borrowing, government-guaranteed debts and local authorities borrowing, increased sharply in 2013. The total loans were estimated to reach VND513 trillion, an increase of 23.4 percent over 2012.

Of this, the government borrowed VND181 trillion from the public through bond issuance, its highest-ever level, 28 percent over that of 2012. The government also borrowed $5 billion from foreign sources, up by 14 percent over 2012.

However, the most worrying problem, according to economists, is that total government-guaranteed loans reached roughly VND400 trillion just over the last four years, a sharp increase of 50 percent per annum.

The figures were confirmed by Minister of Finance Dinh Tien Dung when he was queried at the ongoing National Assembly session.

The figure is the government guaranteed debt starting from 2010, the time when the Public Debt Management Law took effect, which tightens the grant of government guarantees.

Vietnam’s public debt and foreign debt management strategy in 2011-2020, approved by the Prime Minister in 2012, also clearly stipulates that the government will restrict its guarantees of businesses’ debts.

However, what has been happening in reality is quite different.

The statistics showed that in 2013, there was a 15 percent increase in government-guaranteed bonds issued domestically by the Vietnam Development Bank (VDB). Meanwhile, the figure decreased by 58.4 percent for the Bank for Social Policies.

VDB is known as the bank providing capital to fund big investment and development projects, while the Bank for Social Policies provides preferential loans to help reduce poverty and eliminate hunger. The latter’s drastic drop in bond issuance means that the opportunities for people in need to access low-cost capital to escape poverty and improve their lives have been halved.

The government also came forward and guaranteed the enterprises’ loans from domestic commercial loans. According to the Ministry of Finance, the disbursed guaranteed-loans have reached over VND9.7 trillion.

In 2013, the government guaranteed the borrowing of money from foreign sources for eight projects, totaling $3.16 billion, or 10 percent higher than the previous year. The projects included key national ones such as the bauxite exploitation complex in Lam Dong Province, power plants, and the upgrading of the Highway No 20.

The problem is that a lot of projects’ investors have fallen into insolvency, which forced the government to pay their debts. To date, six projects have seen their debts paid by the state budget, including five cement and one paper projects, totaling VND993 billion.

The State Audit, in its 2013 newly released report, pointed out that there are problems in guaranteed grant management, especially the guarantee for foreign loans.

TBKTSG