After five years of implementation the Law on Public Debt Management is to be amended to conform to international practice. Particularly noteworthy are the extent of public debt management and the responsibility of stakeholders in spending.

According to the Ministry of Finance (MoF), in the five years the law has been on the books it has created a harmonious and sufficiently robust legal environment for public debt management in Vietnam. At the same time, publicity, transparency, inspections, and control by society over public borrowing and repayment have gradually improved.

Points to consider


The law has created a key legal environment for the mobilization of domestic and foreign capital sources for investments in socioeconomic development. In the 2010-2015 period, total debt reached 14 per cent of GDP on average, accounting for 44 per cent of total development investment by society as a whole and growing by an average of a rapid 18.6 per cent per year.

In particular, mobilization by the government accounted for 76.4 per cent, at an average of VND360 trillion ($15.8 billion) per year, government-guaranteed loans accounted for 20.3 per cent, at an average of VND93 trillion ($4.09 billion) per year, and local government loans accounted for 3.3 per cent, at an average of VND15 trillion ($660 million) per year.

Mobilization by the government was primarily done by issuing government bonds, receiving ODA, and taking out foreign loans. The amount of government bonds issued has reached more than VND1 trillion ($44 million), accounting for 46.3 per cent of total loans by the government and increasing over 25 per cent annually.

Total foreign loans disbursed by the government stands at nearly VND597 trillion ($26.26 billion), accounting for nearly 27.5 per cent of total loans. Foreign loans are mostly used for investment in and the development of socioeconomic infrastructure and poverty reduction efforts and account for over 91 per cent of total loans.

In the 2010-2015 period the government guaranteed the performance of various programs and key projects using domestic loans and foreign debt, with total committed capital of $12.4 billion, more than double the amount in the 2007-2010 period, including guaranteed domestic loans, accounting for 54 per cent, and foreign debt, accounting for approximately 46 per cent. 

Consequently, in the 2010-2015 period, total government debt to balance the State budget for development investment reached VND1.4 trillion ($61.6 billion), an average of 7 per cent of GDP and an increase of 14 per cent each year.

The Law on Public Debt Management has also promoted the development of domestic bond markets. The size of the bond market increased from 2.8 per cent of GDP in 2001 to around 19 per cent in 2011 and 21.2 per cent in 2014. Government bonds and bonds guaranteed by the government represented about 19 per cent of GDP in 2014.

It is expected that, this year, VND250 trillion ($11 billion) in government bonds will be issued, in particular five-year bonds worth VND180 trillion ($7.92 billion), ten-year bonds worth VND50 trillion ($2.2 billion), and 15-year bonds worth VND20 trillion ($880 million). 

According to Mr. Truong Hung Long, Director of Debt Management and External Finance at MoF, there are still a range of issues to consider in the management of public debt. 

The size of Vietnam’s public debt isn’t in keeping with international practice, there are overlaps between debts, and there are matters relating to the ceiling on public debt, business debt management, and the relationship between public debt management and financial policies. 

To resolve these problems Mr. Long said it is essential to implement public debt management policies in order to raise capital and strengthen the balance of the State budget and investment in socioeconomic development. 

The powers and responsibilities of the National Assembly, the executive, ministries, branches, localities, enterprises, and units using public debt need to be clarified, minimizing those who need guidance in implementing the law.

Strategic, effective administration needed

To evaluate the effectiveness of the implementation of the law in recent years, the MoF has consulted agencies and international organizations, including the World Bank (WB).

Ms. Victoria Kwakwa, WB Country Director in Vietnam, said that after five years of implementation of the Law on Public Debt Management the country needs to apply international experience to gradually conform to international practice and strengthen fiscal policy to ensure efficient public debt management.

“The WB stands ready to provide technical assistance to the MoF to improve the efficiency of public debt management to ensure debt safety and national financial security,” Ms. Kwakwa said.

According to Mr. Thomas Magnusson, a consultant at the WB, while Vietnam is moving towards a market mechanism, borrowing more and more under the terms of trade opens up many loan schemes and several financial instruments. 

In such environments, the main condition is to have strategies on the basis of trade-cost plans per risk to guide borrowing decisions and other market transactions.

He stressed that the lack of an official strategy can easily lead to bad choices and increases risk. Therefore, Vietnam should move towards a process of good management to guide the government’s debt. 

Vietnam should identify clearly the goals in debt management, with a medium term strategy and a short-term tactical plan, and actively implement other market transactions. 

“It is necessary to determine that the scope of the Law on Public Debt Management focuses on the State sector, in the wider sense including State enterprises and State-owned banks being monitored during fiscal risk management,” he said. 

“Government debt indicators must be fully consistent with international practice.” 

VN Economic Times