VietNamNet Bridge - The Ministry of Finance (MOF) still has not made a decision on the time to issue $3  billion worth of government bonds in in the international market. A source said the plan may be delayed until 2016.

 

Just a few weeks ago, local newspapers reported that MOF geared up for preparatory works for the international bond issuance right after the National Assembly gave the go-ahead to the plan. 

The government, when submitting the bond issuance plan to the National Assembly, emphasized that it was the right time to issue bonds, as the interest rates in the international capital market are at low levels.

Finance experts, urging the government to issue bonds, noted that Vietnam should implement the plan in 2015. They also stressed that the scanty budget now needs money as soon as possible.

A report showed that VND364.166 trillion worth of bonds with high interest rates are about to reach maturity. Meanwhile, it is difficult to arrange money to pay debts now due to the decrease in budget revenue.

However, MOF’s Minister Dinh Tien Dung has just stated that it is not the right time to issue international bonds.

When does MOF thinks will be the right time? Thoi Bao Kinh Te Sai Gon quoted its source as saying that the bond issuance may be delayed until 2016. Some management agencies have warned about exchange rate fluctuations, calling on a thorough consideration of the issue.

The source said if the dong/dollar exchange rate fluctuates, and the US dollar price increases sharply and the dollar interest rates go up, the public debts in Vietnam dong will be increasing, thus increasing risks for the state budget.

The US dollar has been appreciating as investors believe the US Federal Reserve (FED) will raise the prime interest rate in December after it did not do so in September.

The index of the US dollar against six currencies including Japanese yen and euro increased by 3.4 percent in November.

MOF also hesitated to issue bonds in the international market because is now easy to raise funds in Vietnam at low costs, especially when the National Assembly has allowed the issuance of short-term bonds. 

It is expected that VND45 trillion worth of 3-year term bonds would be issued in the fourth quarter.

Doanh Nhan Sai Gon also quoted an analyst as commenting that Vietnam needs to think carefully about the bond issuance overseas, as the foreign debt increase would make Vietnam more vulnerable to economic shocks in the world. 

The analyst also warned that foreign capital would not be as cheap as thought if considering the exchange rate fluctuations.

Thanh Lich