VietNamNet Bridge - The government has begun implementing the plan on mobilizing capital in large quantity after getting the go-ahead from the National Assembly as the state budget is becoming exhausted.

 

The head office of the Ministry of FInance in Hanoi

The National Assembly on November 11 approved the resolution on the state budget estimates, agreed to resume the issuance of short-term 3-year government bonds and ratified the plan to issue $3 billion roll-over government debts on the international market.

The domestic bond witnessed big changes just one week later. The first 3-year bond issuance was successfully implemented on November 18 after one year of interruption. All the VND7 trillion worth of bonds were sold out.

An analyst commented that it was a good move to resume the 3-year bond issuance. Vietnamese won’t inject money into long-term securities as they always worry about the dong depreciation. 

The comment reflected the real situation of the market if noting that 27 investors attended the auctions and registered to buy VND23.84 trillion worth of bonds.

He went on to say that the success of the 3-year bond issuance shows that the bond issuance plan in 2015 is within reach. However, he noted that the capital mobilization cost would be high. One year ago, the State Treasury only had to pay 5.19 percent per annum in interest rate on average, while it now has to pay 5.9 percent.

In its bulletin released on November 23, Maritime Bank’s Economics Research Center said if the State Treasury can continue succeeding with its bond issuance plans in the next five weeks, it will be able to mobilize VND35 trillion more in capital. If so, the total capital to be mobilized would be VND210 trillion. 

Maritime Bank has warned that it would be a difficult task to issue many bonds in the last weeks of the year as the credit demand tends to increase during that time. Meanwhile, the government borrows money not only to spend on investment and development, but also to make payments for the bonds due early next year.

According to the Hanoi Stock Exchange (HNX), in the first quarter of 2016 alone, VND55 trillion worth of government bonds will reach maturity. 

The Ministry of Finance (MOF) is also making hectic preparations for the plan on issuing $3 billion worth of bonds in the international market in 2015-2016.

However, MOF’s Minister said at a National Assembly’s session on November 17 that MOF, which is keeping a close watch over the international market, thinks it is now not the best time to issue bonds.

According to Maritime Bank, the CDS (credit default swap) of Vietnam’s 10-year international bond is about 315 points, higher than that in 2010 and 2014, at 295 and 242 points, respectively.

TBKTVN