VietNamNet Bridge - The State Bank of Vietnam (SBV) and the Ministry of Finance (MOF) are discussing a plan to withdraw overseas deposits of credit institutions to fund state investments.

Deputy Governor of the State Bank Nguyen Dong Tien said at the government’s regular press conference on October 1 that state agencies, after considering investment estimates for transport and infrastructure projects, are planning to withdraw the money credit institutions had deposited at foreign banks to fund projects.

“MOF is drawing up a plan to mobilize the capital,” Tien said. “We believe that this is one of the most feasible capital mobilization solution, suitable to current economic conditions and bank operations.”

Vietnam needs huge capital for huge transport projects it is implementing. In 2014, it was not a big problem for investors to call for capital when many commercial banks agreed to provide loans to fund projects. 

However, the capital flow to transport projects has been blocked by the State Bank for fear of risk. The central bank, in an instruction released in mid-July, requested banks to enhance risk control in lending to BOT transport projects.

Banks have been told to check investors’ capability thoroughly before providing loans and to only agree to fund projects with investors who have their own capital, meeting the requirements stipulated in the current laws.

In theory, investors can call for capital by issuing bonds. However, experts have warned that the solution would not be feasible in the context of Vietnam’s high public debt. 

A government report shows that Vietnam’s public debt is still within the safety line. However, a report recently released by the Ministry of Planning and Investment (MPI) showed that the debt has reached 66.4 percent of GDP using a new calculation method.

Minister Nguyen Van Nen, chair of the Government Office, confirmed that the government was not considering issuing international bonds in the immediate time.

Deputy Minister of Transport Nguyen Hong Truong said at the Global Investment Forum said that Vietnam would need $50 billion in the next five years to develop infrastructure. 

With the current regulations on the public debt ceiling, the official development assistance (ODA) capital would be able to satisfy 28 percent of demand, while the remaining 70 percent of capital would be sought from the public and other sources.

Eric Sidgwick, Country Director of the Asian Development Bank (ADB), confirmed that Vietnam will have to satisfy the requirements on the public debt ceiling during lending and borrowing activities.

The latest report by the National Finance Supervision Council has issued a warning about Vietnam’s public debt, saying that the credit default swap (CDS) has increased to 260 points, the highest level since January 2014. 

VNE