Mai Tien Dung, Minister and Chairman of the Government Office, has defended a proposal for hiking Government debt to no higher than 55% of gross domestic product (GDP).

The National Assembly (NA) Finance and Budget Committee at a meeting of the NA Standing Committee said the Government had sought to adjust up the Government debt ceiling from 50% to 55% of GDP.

However, experts said given the increasingly tight State budget, the country should keep public debt at 65% of GDP and Government debt at 50% of GDP as in the 2011-2015 period. 

Dung said the 55% Government debt cap would make it possible to raise funds for investment projects so as to meet the 2016-2020 socio-economic development targets set by the NA.

He said that percentage is reasonable as the Government will reduce government-guaranteed debt and restrict outstanding loans owed by cities and provinces. 

In Resolution 10/2011/QH13 on socio-economic development in the 2011-2015 period, the NA approved public debt at 65% of GDP, Government debt at 50% of GDP and foreign debt at 50% of GDP.

Dung said besides the resolution, the Government’s Decision 958/QD-TTg dated July 27, 2012 mentioned a number of targets for public and foreign debt in 2011-2020 with a vision towards 2030. The targets were set in line with the 2011-2020 socio-economic plan, the financial plan until 2020 and the Law on Public Debt Management, with recommendations from international financial organizations taken into account.

Accordingly, the Government will keep public debt at no higher than 65% of GDP and Government debt at 55% of GDP or below.

In a report submitted to the NA, the Government said Government debt stood at 50.3% of GDP in 2015 and could reach an estimated 53% in 2016-2019 as the Government needs huge capital to fund the budget deficit and investment projects in 2016-2020.

The Government has worked out a number of solutions to make debt obligations manageable. For instance, public debt increase should be lower than economic growth and inflation while the budget deficit should be monitored and State investment capital channeled into major projects only.

The oil price, foreign exchange rate and other risks should be taken into consideration when preparing plans for finance, borrowing and repayment of public debt.

Government-guaranteed loans will fall sharply while overspending and debts owed by local governments will be put under control and budget collections increased.

The efficiency of State-funded investment projects must be improved and public-private partnership investment will be boosted to make the most of resources in the private sector.

Regulations and policies for public debt management will be adjusted to make them fit the country’s conditions and international practices.

SGT