Public debt estimated to reach 56.8% GDP by year end
The government’s report on public debt in 2020 and estimates in 2021 show remarkable figures about the national debt.
The total Government debt repayment in the first 9 months of 2020 was VND 241.375 trillion, or 65.8 percent of the whole yearly plan, including VND180.95 trillion paid for domestic debts and VND60.425 billion for foreign debts.
The government, considering predictions about the last months of the year, thinks that the total public debt will reach 56.8 percent of GDP by the end of the year, while the government’s debt will be 50.8 percent of GDP. The government’s debt direct repayment on the state budget collection would be 24.1 percent and the nation’s foreign debts would be 47.9 percent of GDP.
As such, the major indexes of the public debts in comparison with GDP by the end of the year would be within the safety line set by the National Assembly.
The government commented that the debt restructuring had made progress. The outstanding public debt has decreased from its peak of 63.7 percent of GDP in 2016 to 55 percent in late 2019. The public debt growth rate has decreased from 18.1 percent in 2011-2015 to 6.8 percent per annum in 2016-2019. Meanwhile, the interest rates are on the decrease and the payment terms on the increase.
“The repayment of the government’s debts in the last years have been implemented strictly to ensure repayment on time for both the government’s direct debts and the government’s borrowing for relending, not letting debts become overdue, which would break Vietnam’s commitments to lenders,” the report says.
In 2021, the government plans to borrow VND579 trillion for central budget balancing, including VND318 trilion for covering the central budget overexpenditures and VND260 trillion for paying the principal on the central budget.
The Government's direct debt repayment obligation is roughly VND368.276 billion, of which domestic debt payment obligation is VND323.093 trillion and foreign debt obligation is VND45.183 trillion, equal to 27.4 percent of the state budget revenue.
As such, the ratio of the government’s direct repayment on the state budget collection exceeds the threshold of 25 percent set by the National Assembly for 2016-2020.
This is because the debts in government bonds are due in 2021 (VND187.001 trillion), which accounts for 13.9 percent of the state budget collection.
The government reported that the ratio of the government’s direct repayment obligation to the state budget revenue has increased rapidly and the figure is likely to exceed 25 percent in some years in the next periods, because the debts to be repaid are uneven in coming years and are especially high in some years.
This could pose potential risks to national financial security and affect the national credit rating.
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The total State budget revenue was estimated to be at VND668,700 billion, equaling 44.2% of the anticipated amount by the end of June, marking a 10.5% drop over the same period last year and the lowest levels since 2013.