VietNamNet Bridge – The government and the National Finance Supervisory Council both have denied that debts are reaching a “dangerously high” level that could lead to insolvency.

Before the ongoing National Assembly’s session, the public heard detailed figures about public debt presented by the Minister of Finance Dinh Tien Dung.

Prior to 2009, the public debt had always been low which just accounted for 31-38 percent of GDP. The debt has been increasing sharply since 2009, when Vietnam increased borrowing to stimulate demand.

In 2014-2015, the government has to issue VND170 trillion worth of government bonds to offset the decreases in state revenue due to the economic recession.

The plan to issue VND225 trillion worth of bonds in 2011-2015 was ratified by the National Assembly.

The sovereign debt has increased rapidly from 50 percent of GDP in 2011 to 64 percent in 2015, or 18-25 percent per annum. As such, the public debt remains “within the safety line” and “not as dangerous as people think”.

Dung noted that domestic borrowing is on the rise and foreign borrowing is on the decrease, which would ease the reliance on foreign sources.

However, most domestic loans are short term, which means that the government will have to pay debts soon, in 2015-2016.

Although Vietnam pays its debts in time, Dung said the current debt structure is not sustainable and that MOF over the last three years had to issue rollover bonds estimated to be worth VND137 trillion.

Regarding the debt strategy until 2020, MOF believes the government would have to issue VND50 trillion worth of bonds every year in 2017-2020, if expected overspending is 4-5 percent per annum.

The government would have to borrow $5-6 billion a year from foreign sources, mostly through ODA (official development assistance) and other preferential loans. Of this amount, $1.5-2 billion would be borrowed to re-lend to domestic businesses and another $3-4 billion to develop key projects.

The government believes that sovereign debt will increase in the time to come, reaching its highest peak in 2017, when public debt accounts for 64.9 percent of GDP, and then falls gradually to 60.2 percent of GDP by 2020.

This scenario would occur if the GDP had 6.2-6.8 percent growth rate per annum in the 2015-2020 period, and the inflation rate was 5-6 percent and overspending 4-5 percent.

Truong Van Phuoc, deputy chair of the National Finance Supervisory Council, also reassured the public, saying in an interview with local media that he does not foresee insolvency.

“I think people have been exaggerating when talking about public debts. I have to remind you that the safety line set by the National Assembly is 65 percent of GDP,” Phuoc said. “I don’t think public debt is a serious problem.”