VietNamNet Bridge - “The world is trying to run away from the yen, but Vietnam seems to go in the opposite direction,” Le Xuan Nghia, member of the National Finance & Monetary Advisory Council, said. 

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Just within the first half of 2016, the Japanese yen made new records. It has appreciated against 31 major currencies used in global circulation, increased by 15 percent in value compared with the US dollar and 17 percent with the dong, the sharpest increase in the last 15 years.

The yen appreciation has caused Vietnam’s public debt, with a large proportion in yen, to increase.

According to Pham The Anh from Hanoi Economics University, of the total public debt of $125 billion by 2015, or 62.2 percent of GDP, the debt in yen accounts for 38 percent, dollars 25 percent and euros 15 percent. 

Ngo Tri Long, a finance expert, confirmed that the 20 percent increase of the currency just within one year has caused the yen debt, estimated at $45 billion, to increase proportionally.

According to the National Finance Supervisory Council, the dong/dollar exchange devaluation of 5 percent last August increased public debt by 0.9 percent of GDP. 

A report shows that non-refundable aid in 2008-2011 only accounted for 2.5 percent of the total ODA (official development assistance) granted by the Japanese government to Vietnam. 

The other loans (under which the Japanese contractors’ presence is not compulsory) are long-term loans (30 years, with 10 years of grace period) have an interest rate of 1.4 percent on average.

Just within the first half of 2016, the Japanese yen made new records. It has appreciated against 31 major currencies used in global circulation, increased by 15 percent in value compared with the US dollar and 17 percent with the dong, the sharpest increase in the last 15 years.
As such, with the yen appreciation of 17 percent against the dong in the last year, the real interest rate Vietnam has to pay for the loans is nearly 2 percent per annum.

If the yen maintains its strength in the next decade, ODA loans will no longer be cheap if compared with dollar international bonds, which now have interest rates of around 4.8 percent per annum for 10 years. 

In fact, the preferential loans from Japan have put heavy burden on key enterprises in the national economy. The Airports Corporation of Vietnam (ACV) and Pha Lai Thermopower JSC (PPC) are two of them.

They borrowed 93 billion yen, or VND190 trillion in total, but incurred the loss VND1 trillion in the last year. This means that they have to pay 0.54 percent of total value of the loans.

ACV, for example, got Japanese ODA for the Tan Son Nhat Airport project with the interest rate of 1.6 percent per annum, but with the yen appreciation, it has to pay 2.14 percent per annum in reality. 

Similarly, with the preferential interest rate of 0.5 percent per annum on a loan to build Noi Bai T2 terminal, the actual interest rate is 1.04 percent.


NCDT