Public debt should be managed by one focal point agency

Consultation workshop on the draft amendments to the public debt management law took place on August 1, 2017, in Vinh Phuc. Photo: H V

Centralized debt management to reduce risk

Mr. Jean Luc Steylaers – Representative of International Monetary Fund suggested that Vietnam should centralize functions of debt management to reduce debt risk, debt costs and create conditions to manage debt more efficiently; allow to take economic advantages, reduce number of officers in charge of debt management; create better conditions for market relationship and create favorable for investors to understand clearly about public debt.

Approving with the above opinion, Mr. Scenaider Clasein Siahaan, Director of Budget Financing Strategy and Portfolio Department of Ministry of Finance of the Republic of Indonesia, said that the Budget Financing and Risk Management Department of Indonesia is similar to the Department of Debt Management and External Finance of Ministry of Finance of Vietnam. The Department is established to become a professional unit which effectively supports the budget financing at risk to be measured to maintain fiscal sustainability.

This unit performs the management of Government's debt portfolio efficiently, transparently, and ensures the accountability; governs debt issue and borrowing by identifying debt capacity to support fiscal sustainability; create independence in capital mobilization for national development through efforts to prioritize domestic capital sources and build a stable and efficient domestic financial market; implement international cooperation in the context of seeking alternative sources of finance and support the stabilization of the regional financial market. "This is a good and effective model," noted by Mr. Scenaider Clasein Siahaan.

As a member of the Prime Minister’s economic advisory team, Dr. Tran Du Lich said that it is necessary to have a focal point agency in charge of borrowing and repaying loans from the negotiation of loan conditions, loan use management, and repayment plan. And that agency should be the Ministry of Finance. The Minister of Finance must report to the National Assembly on the public debt situation annually or upon request.

It should be considered to assign the focal point agency to the Ministry of Finance

Economist Dr. Vu Dinh Anh pointed out: Law on Public Debt Management 2009 as well as the Draft Law on Public Debt Management (revised) affirmed that the Government should unify the public debt management and assign the Ministry of Finance to act as the focal point agency for public debt management. In other words, the Ministry of Finance shall take all responsibility for public debt management as assigned by the Government, in its turn, the Ministry assigns the Department of Debt Management and External Finance to undertake this important task.

In fact, the process of public debt negotiation is mainly carried out by the State Bank of Vietnam, while the allocation of public debt is under the jurisdiction of the Ministry of Planning and Investment. Meanwhile, the Ministry of Finance is only responsible for recording debts and focuses on seeking sources for repayment. "All of these public debt management processes are in line with the government's assignment and there will be no problem if the Government performs well the unified management of public debt and implements the synchronous coordination in activities of ministries and sectors involved in public debt management. However, the actual implementation is still separate and lacks coordination in management and occurs the passing the buck on each other and even appears the local interests overwhelming national interests in the management and use of public debt " Mr. Anh frankly shared.

The lack of consistency between debt borrowing, debt use, and debt repayment occurs both in bookkeeping, public debt management information system and in the assessment of the efficiency of the use of individual loan and appropriate repayment sources. Therefore, public debt is still managed in awkward and passive manner.

To address the problem of public debt management, there are many different approaches and measures. However, with our country’s conditions, Dr. Vu Dinh Anh suggested that the Government should assign the task of public debt management to one focal point agency which is the Ministry of Finance on the basis of gathering all units related to public debt in other ministries to the Ministry of Finance to unify the management to a focal point agency and delegate power and responsibility clearly and comply with international practice.

The Ministry of Finance will cooperate with National Assembly State Budget and Finance Committee shall receive and present the consultations for the Bill before submitting the National Assembly for approval in the coming session.