Improve the effectiveness of public debt management: Be careful of mobilization of capital, borrowing, controlling of allocation

The government will also strictly control enterprises’ borrowing. Picture: H.Vân.

By the end of 2017, public debt is about 62.6% of GDP, government debt is about 51.8% of GDP and the country's external debt is about 45.2% of GDP. This partly demonstrates the Government's solutions have been bringing positive effects…

Complete the capital mobilization plan

As planned, the task of mobilizing government’s loans for the central budget balance in 2017 is of 316,300 billion vnd, including loans to cover the deficit of 172,300 billion vnd (equal to 3.38% of GDP) to repay the original principal of 144 billion vnd.

About the Government's debt repayment obligations in 2017, the Government's debt obligation in 2017 is about 260,150 billion vnd, including domestic debt repayment of 214,878 billion vnd, repayment of foreign debts of 28,022 billion vnd; debt repayment of the Government's foreign loans in 2017 at about 17,250 billion vnd.

The repayment source will be included in the central budget’s estimates for repayment of interest, fees and mobilizing new capital sources, which will be allocated from the increase of collection and save for expenses and surplus to repay principal. Estimated repayment obligations of the Government (both domestic and foreign) are calculated in the central budget balance is 242.900 billion.

In addition, the Cumulative Debt Fund and direct re-lending units make repayment of loans of about 17,250 billion vnd. As a result, the total loan repayment in the first nine months of the year was 213,316 billion vnd (equal to 82% of the plan), of which the repayment was included in the central budget’s estimates was 200,417 billion vnd, repaying the loan for re-lending was 12,899 billion VND. Debt repayment is carried out strictly, timely, fully in accordance with commitments with donors.

About the limit of government guarantee, the Resolution No. 25/2016/QH14 of the National Assembly dated November 9, 2016 on the National Financial Plan for 5 years of 2016-2020, the Resolution No. 07-NQ/TU dated November 18, 2016 of the Politburo on policies and measures to restructure the state budget and public debt management to ensure the national financial and sustainable security has set the guidelines on the guarantee limit in 2017 and the following years: “Limit the maximum level of government guarantee for new loans; for 2 policy banks, underwriting by annual debt repayment”.

Since then, the Prime Minister has approved the guarantee limit for 2017 to issue bonds to the Social Policy Bank and limit underwriting to the Vietnam Development Bank. For guaranteeing enterprises to take domestic and foreign loans, in the first nine months of the year, it was not implementing Government guarantee for new loan projects. The net disbursement of granted projects remains under the limit approved.

In the locality, the loan is estimated at 14,044 billion vnd in 2017 (excluding the loan of 3,000 billion vnd from the canal solidification source in 2016 and about 1,700 billion vnd in Cat Linh – Ha Dong Urban Railway Project - transported debts to Hanoi by the Ministry of Transport. Previously, based on the Decision of the Prime Minister on the allocation of state budget estimates in 2017 and Decision of the Minister of Finance on the allocation of state budget revenue and expenditure in 2017, the plan of loans and debt payment of localities in 2017 is 23,857 billion vnd, including domestic loans of 17,500 billion vnd; loans from the Government's foreign loans is 6,357 billion vnd.

Manage debt of enterprises

About the public debt situation, Minister of Finance Dinh Tien Dung (in the discussion on socio-economic situation on October 24, 2017) stated: “This time we feel much lighter than two years ago, because the pressure was reduced while the scale increases, as in the report until the end of this year, public debt, government debt is still within the limit, the structure and government debt changes positively.

According to the minister's analysis, in 2011, foreign debt in the government debt was 60%, domestic debt was 39%, but this time the two figures reversed (foreign was 39%, domestic was 60%), the restriction of the public debt is in the right direction to reduce foreign debt to increase domestic debt. On the other hand, the term of issuing government bonds increased from an average of 1.84 years in 2011 to 8.7 years by the end of 2016. Since the beginning of 2017, there is no issue under the 5-years term, there are many issues with the 30-year term and the average term in 2017, the term of government bonds is 14.1 years so debt repayment is reduced. At the same time, government bond yields continued to decline from 12.1% in 2011 to 6.28% in 2016 and around 6% - 6.1% in 2017. Thus, the term lasts 3-4 times, the interest rate reduced by haft, making repayment obligations reduce and contributing significantly to the restructuring of public debt.

Based on the country's public debt and external debt ratios in 2016, the estimates of public debt ratio in 2017, in order to further strengthen public debt management, the Government has implemented many solutions. In particular: Continue to closely manage the mobilization of capital for state budget and development investment, focusing on mobilizing capital to offset the state budget deficit in the budget balance and medium-term public investment in the period 2016-2020; Only loans for development investment, no loans for regular expenditures; strictly control the borrowings on re-lending and Government guarantees.

The Government will also strictly control the borrowing activities of enterprises (medium, long-term and short-term loans) under the form of self-borrowing within the limits permitted by the Prime Minister in the Decision No. 544 / QĐ- TTg dated April 20, 2017, approving the medium-term debt management program for the period 2016-2018. Specifically, the limit of medium and maximum annual long-term commercial loans of enterprises is 5.5 billion vnd, the maximum annual increase of short-term external debt is 8-10%.

In addition, management agencies will focus on statistics of the number and value of new projects signed and likely to be signed in 2016-2020 but not in the list of medium-term public investment projects. period 2016-2020 to have a basis to assess the impact on public debt as well as medium-term financial planning; To propose and select important and important development investment projects to mobilize donors and use ODA capital, while taking into account cost trends and shorter loan term due to Vietnam IDA (World Bank preferential loans) to ensure the effectiveness of the project.

In addition, management agencies will focus on statistics of the quantity and value of new projects signed and likely to be signed in 2016-2020 but not in the list of medium-term public investment projects in the period 2016-2020 to have a basis to evaluate the impact on public debt as well as medium-term financial plan; propose and select important development investment projects to mobilize donors and use the ODA capital, while taking into account the increase of cost trends and shorter loan term due to Vietnam graduated IDA (World Bank’s concessional loans) to ensure the effectiveness of the project.