VietNamNet Bridge - The Ministry of Finance (MOF) has reassured the public that the international bond issuance for debt swap will not lead to an increase in the government’s debts, while the public debt indexes will be maintained within the safety line.

MOF Minister Dinh Tien Dung on October 12 submitted to the National Assembly’s Standing Committee the plan to issue $3 billion worth of international bonds.

Issuing bonds to borrow more money is a ‘delicate’ issue at this moment, when Vietnamese economists and international organizations have repeatedly given warnings about the increased public debt.

However, MOF affirmed that the roll-over bond issuance will not increase Vietnam’s public debts, while the government’s foreign debts will be curbed at no higher than 50 percent of the government’s total debts as stipulated in the 2011-2020 public debt management strategy.

According to Thoi Bao Kinh Te Sai Gon, the bonds will have terms of 10-30 years, while the interest rates will depend on the market interest rates at the issuance moments.

Meanwhile, VnExpress quoted the National Assembly’s Chair of the Finance & Budget Committee Phung Quoc Hien as saying that the budget law does not allow the issuance of international bonds for debt swap. 

However, Hien said issuing international bonds was the most feasible solution for now as the State Treasury finds it difficult to issue bonds in the domestic market. As much as 40 percent of the bonds put on sale cannot be sold.

“The government has proposed to issue international bonds for debt swap. If the National Assembly says ‘no’, it will have to cancel the plan. But the situation will be very difficult,” Hien said.

Dien Dan Doanh Nghiep, quoting an MOF report, reported that despite a lot of exertions, in the first nine months of the year, MOF could only issue VND127.473 trillion worth of government bonds, both in dong and foreign currencies, equal to 60.6 percent of the last year’s same period, fulfilling 51 percent of the plan.

The ministry said that if the bond terms cannot be satisfied, it would be able to mobilize VND160 trillion worth of capital this year only instead of VND250 trillion as planned.

Meanwhile, the amount of money needed to pay for bond principal and interest in the first nine months of the year was VND160.684 trillion. 

As such, the amount of capital mobilized through bond issuance was not enough to pay debts. 

However, Hien admitted that it is necessary to consider the bond issuance thoroughly, because the international bond issuance will put pressure on the domestic finance market.

National Assembly’s Chair Nguyen Sinh Hung noted that it is necessary to think of the measures to develop both the primary and secondary markets to lure investors.

CV