VietNamNet Bridge - Economists say that the National Assembly’s request to issue government bonds more than five years “goes against all financial management theories” and “does not fit  Vietnamese practice”. 

What analysts warned one year ago has come true.The Ministry of Finance (MOF) has struggled hard this year to borrow money for state spending as familiar capital sources have shrunk because of a National Assembly’s decision.

The National Assembly last year released a resolution that said from 2015, the government can only issue long-term bonds (five-year or longer), while it is prohibited to borrow money for short term to offset the budget overspending.

The decision was made, according to analysts, amid the warning about the increasingly high public debt. 

The National Assembly then decided that it is necessary to tighten the government’s borrowing so as to better control public debt.

However, the method was “quite unreasonable”, economists warned.

“Being temporarily stuck for money is the situation any businessman would meet in life. You will only get paid for a late consignment of goods in 10 days, while you have to pay to your workers in three days. In this case, you should get a short-term loan and pay the money back when you receive your payments,” an economist explained.

“Similar things may occur with the state budget. And the proper solution in this case is issuing short-term government bonds to get money for prompt spending and pay at maturity when the cash flows into the account,” he said.

It is MOF’s job to calculate how much money the state budget needs and how much to borrow. It is also its job to define the terms of government bonds to issue to optimize the use of the loans. 

And the intervention has placed big difficulties for MOF to mobilize capital for the state spending. Many government bond bidding sessions failed this year. One of the reasons behind the failure, according to analysts, is the lack of short-term bonds for investors to choose.

“The National Assembly’s request to only issue 5-year and longer-term government bonds is contrary to all financial theories and practices,” commented Dr. Le Hong Giang, a finance expert.

Giang stressed that issuing bonds with different terms of maturity is a necessary operation which not only helps optimize the use of borrowed money but also helps create interest rate curves and improves monetary policies’ efficiency.

Dr. Huynh The Du, also a renowned finance expert, said government bonds at different terms can serve as the government’s financial instruments to regulate the financial market. 

“The presence of government bonds at different terms is very important in the market,” he said.

TBKTSG