The government’s new scheme on debt management is expected to fuel economic recovery

Deputy Prime Minister Le Minh Khai nearly two weeks ago inked and promulgated Decision No.448/QD-TTg approving Vietnam’s Programme on Public Debt Management for 2022-2024 and Plan on Public Debt Borrowing and Payment for 2022.

The prime target is to ensure sufficient loans via diversified sources of capital and borrowing models both at home and abroad, in order to meet the demand of balancing the state budget, including loans for implementing the fiscal policies in support of the country’s Programme on Socio-economic Development and Recovery.

The government also aims to “closely control debt safety norms, ensuring public debt stay within the limit permitted by the National Assembly,” said the decision.

Under Decision 448, total loans for the 2022-2024 period will be a maximum of 88.87 billion USD, including 83.78 billion USD for the central budget and 5.08 billion USD for refinancing.

The total debt to be paid by the government in this period is estimated to be 48.52 billion USD including direct payment of 42.21 billion USD and refinancing payment of 6.3 billion USD.

“It is necessary to take the initiative in debt payment with overdue debts not allowed to happen as it will affect the government’s international commitments,” read the decision.

In 2022 alone, the government will have to use 14.6 billion USD for debt payment.

As for public debt borrowing and payment for this year, the government will borrow a maximum sum of USD29.28 billion, including 28.12 billion USD for the central coffers and 1.16 billion USD for refinancing.

“The capital will be mobilised flexibly from government bond issuances with an average tenor of under nine years - if necessary, such bond issuances can be conducted with foreign currencies; from official development assistance and foreign concessional loans; and if necessary, capital can be borrowed from other legal financial sources or from government bond issuances for the State Bank of Vietnam,” said Decision 448.

Meanwhile, the government will in this year pay a total debt of about 14.6 billion USD including 13 billion USD for direct payment and 1.56 billion USD for paying debts for refinanced projects.

A number of high-profile international organisations have proposed support for the country to push up socioeconomic development.

In late March, World Bank vice president for East Asia and Pacific Manuela V. Ferro paid a 5-day visit to Vietnam, reaffirming the institution’s commitment to supporting Vietnam in realising its goals of becoming a high-income economy by 2045 and reaching net zero emissions by 2050.

“We are committed to work with Vietnam as it charts a renewed course towards ambitious development goals,” Ferro said. “Our partnership will focus on strategic areas that promote productivity-led, climate-resilient, inclusive growth, contributing the World Bank’s global and local expertise, embedded in evidence-based analysis and financing.”

A highlight of the trip was the agreement between Ferro and Prime Minister Chinh to jointly produce a report, Vietnam 2045 that will offer pathways and solutions for Vietnam to realise its aspiration of becoming a high-income economy by 2045. The report will take stock of the pace of reforms laid out in 2016’s Vietnam 2035 roadmap, analyse how Vietnam’s economic trajectory has been affected by the COVID-19 pandemic and other global mega-trends, and provide recommendations to inform policy reform discussions leading up to the 14th Party Congress, scheduled for early 2026.

“Vietnam’s development journey is evolving and so is the nature of our partnership,” said Ferro. “The World Bank will offer innovative solutions that address new development challenges and fit the unique profile of Vietnam’s development opportunities.”

The World Bank’s current portfolio in Vietnam consists of 33 operations, worth a total of 5.72 billion USD focused on transforming livelihoods and increasing infrastructure’s resilience to climate risks, education, health care, transport, energy, water resource management, and urban resilience. Since its re-engagement in Vietnam in 1994, the Bank has committed a total of more than 25.3 billion USD toward financing Vietnam’s development.

Last December, the Vietnamese government and the World Bank has signed an agreement for financing of 221.5 million USD to support Vietnam’s recovery from the COVID-19 pandemic. The operation encourages policy reforms under two pillars.

The first supports an inclusive economic recovery by easing the tax burden on businesses, improving access to financial assistance among vulnerable groups, reducing gender gaps in the workplace, and promoting financial inclusion.

The second pillar contributes to greening trade policies, accelerating the adoption of e-government, and increasing the uptake of renewable energy.

Meanwhile, the Asian Development Bank (ADB) has also been offering its support for Vietnam.

“With integrated sovereign, non-sovereign and knowledge approach, the ADB stands ready to support the priority areas of Vietnam’s Socioeconomic Development Plan for 2021-2026 up on the government’s request. The ADB will maintain its engagement in large national projects prioritised by the Government in 2022-2024,” a representative from the ADB in Vietnam said.

“In addition, the ADB offers two climate financing initiatives, namely the ASEAN Green Catalytic Financing Facility (ACGF) and the Energy Transition Mechanism (ETM). The ACGF provides highly concessional funds alongside ADB concessional loans. The ETM is a financial mechanism to support Vietnam’s accelerated replacement of coal with renewable energy. It can bring highly concessional financing resources from global climate funds and philanthropic grants,” the representative said. “So, we are waiting for the government’s views and guidance on Vietnam’s needs for sovereign and non-sovereign financing.”

Last November, Vietnam Oil and Gas Group (PetroVietnam) and the ADB signed an MoU on establishing strategic partnership in the period of 2021 – 2024 to promote clean and renewable energy development as well as to achieve PetroVietnam’s targets in green energy transition. The MoU establishes the foundation for cooperation activities between PetroVietnam and ADB such as strategy and roadmap for green energy transition; carbon capture, utilisation and storage; hydrogen development; offshore wind energy development.

“The ADB and PetroVietnam establish a partnership for collaboration and cooperation in the activities identified for mutual interest of both parties,” said Andrew Jeffries, ADB country director for Vietnam. “As a multilateral financial institution and as a catalyst for global and regional climate funds, the ADB could provide support to PetroVietnam through policy and technical advice, funding for investment from its own financing and/or leverage financing from other sources.”

To support initial activities under the MoU, the ADB will use technical assistance resources and mobilise additional fund from other sources, among which the Australian government has confirmed its funding support to develop a strategy and roadmap for PetroVietnam’s green energy transition.

In another case in last August, the ADB approved a 60 million USD financing package to improve the climate resilience of transport and water supply infrastructure in Vietnam’s south-central coastal provinces of Binh Dinh and Quang Nam, especially in remote upland districts with large ethnic minority communities.

The Climate Resilient Inclusive Infrastructure for Ethnic Minorities Project I will upgrade 121.8 kilometres of roads using climate-resilient design standards, construct 115km of water supply pipelines, and help provide reliable weather and climate data in a timely, cost-effective manner. About 243,000 people, including 126,300 from ethnic minority groups, are expected to benefit from the project.

“The project aims to improve the living conditions of ethnic minority communities in remote areas of Vietnam,” said ADB programmes officer Hong Anh Nguyen. “It will better link remote rural production sites with markets and processing facilities for crops such as acacia and boost beneficiaries’ access to health, education and market services. The project will also expand access to safe water supply and irrigation.”

The financing package includes 58 million USD in regular ADB loans and a 2 million USD grant from the ADB’s High-Level Technology Fund. The grant will fund the supply and installation of data systems for climate risk management. Additionally, the project will include 21.73 million USD in financing from the Vietnamese government.

Source: Nhan Dan