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VietNamNet Bridge – The debt burden of Vietnam is increasing rapidly, both in
terms of debt amount and debt repayment obligations.
The 32.5 billion dollar threshold surpassed
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The foreign debt bulletin No 7 which provides most updated figures show that the debt burden on Vietnam has been increasing rapidly. The total foreign debts, including government’s debts, localities’ debts and the debts guaranteed by the government had increased to 32.5 billion dollars by the end of 2010. Meanwhile, the figure was 27.93 billion dollar the year before.
This spells that just within one year, the foreign debts of Vietnam has increased by 4.6 billion dollars.
If counting on the principal payments worth 1.06 billion dollars, in 2010, Vietnam approved the loan agreements and contracts worth approximately 5.06 billion dollars, which was equal to 5.3 percent of GDP of the same year (the GDP value was 104.6 billion dollars as announced by the General Statistics Office).
There is no common “economic law” in the foreign outstanding loans increases: in 2007, the figure increased by 3.6 billion dollars in 2007, then by 2.6 billion dollars in 2008 and by 6.1 billion dollars in 2009.
However, the noteworthy thing is that in the periods, when the domestic foreign currency market met troubles, the agreements on borrowing foreign loans were regularly approved.
The year 2010 also witnessed the big decline in the foreign currency reserves, estimated at four billion dollars, while the figure was 8.8 billion dollars in 2009.
Borrowing costs getting more and more expensive
Also according to the bulletin No 7, the majority of the government’s foreign debts have the low interest rates of between zero and three percents. Of the 27.86 billion dollars worth of outstanding loans, 21.85 billion dollars worth of debts bear such the interest rates, an increase of 11.1 percent over 2009.
Meanwhile, the loans with the interest rates floating in accordance with six month LIBOR and Euro six month LIBOR only increased very slightly in 2010, about 1.96 billion dollars in total.
However, the report has pointed out the rapid increases of the high-interest rates loans. More than 2.15 billion dollars worth of outstanding loans have the interest rates of between three and less than six percent, a sharp rise of 43 percent over the previous year. Meanwhile, 1.89 billion dollars worth of the loans have the interest rates of 6-10 percent, which double that in 2009.
This has made big changes to the debt payment obligations of the government of Vietnam. With the latest figures, from now to 2015, Vietnam will have to pay the foreign debts of approximately 1.5 billion dollars a year in both interests and principals.
The new peak on debt payment may fall in 2020, with the liabilities up to 2.4 billion dollars. Meanwhile, just a year ago, the Ministry of Finance gave a prediction that the figure would be 1.15 billion dollars for 2020.
In 2010, about 1.67 billion dollars went out of Vietnam to be paid for principals, interests and fees, an increase of nearly 30 percent over the year before (1.29 billion dollars). The ratio of the debts obligation and the state budget of the collection of the year was 5.5 percent.
The currency structure remains relatively concentrated with most of the debts in Japanese yen, SDR, US dollar and Euro. Of this, the debts in Japanese yen account for the biggest proportion of 38.8 percent, SDR 27.1 percent, while US dollar 22.2 percent and Euro 9.2 percent.
How high the risks?
The ratio of foreign debts on the GDP has reached 42.2 percent, which if referring to the World Bank’s standards, is at normal level.
However, the rapid increase of the ratio of foreign debts on GDP shows that the safety line has been in danger. Just over the last three years, from 2008 to 2010, the index has increased by 10 percentage points.
Source: TBKTVN
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