Publicity and transparency to improve the efficiency of public debt management

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Experts discussed the measures to enhance the efficiency of debt management in the coming time.

Existing challenges

Sharing at a scientific workshop entitled "Renewal of public debt management to ensure national financial security", held on the morning of 14th December 2017, Ms. Le Thi Mai Lien, Head of the Public Financial Policy Department, National Institute for Finance said that public debt management was facing many challenges. Public debt was high and growing rapidly, averaging 20% per year in the period 2011-2016. Outstanding public debt was approaching the allowed limit. By the end of 2016, the ratio of public debt to GDP was 63.7%; Government debt was 52.6% and foreign debt was 44.3%. Meanwhile, the mobilized capital in the country increased rapidly, exceeding the ability to provide medium and long-term capital in the market.

From a management aspect, Mr. Vo Huu Hien, Deputy Director General of the Department of debt management and external finance, pointed out a number of other shortcomings. Firstly, although the system of tools to manage the public debt was operated, the mobilization of loans had gone out of the approved strategy and plan, the implementation was ineffective and passive and sanctions to ensure compliance in the implementation.

Besides, the current mechanism of guarantee still relies heavily on state subsidy, state budget suffers from risks of credit risk; delay in debt payment of projects with solvency and fails to arrange collateral assets. Specific provisions on debt classification, deduction and risk management are also not available, so that bad debts arise, and there are no resources to deal with them. The way to solve the problem is revising the financial mechanism, restructuring these debts by moving to state capital investment or reallocation, which increases the debt repayment liability of the Government.

Particularly, the sanctions have not been strict, the situation of project owners, ministries, branches and localities have not yet fully complied with regulations on basic construction investment capital and state budget capital. Information system and data on public debt has not been updated regularly; the reporting regime has not been fully effective, and slowly implemented in comparison with the requirements, and has not effective, especially debts of SOEs guaranteed by the Government and the localities.

Tightening loans

However, according to the representative of the Department of debt management and external finance ,with the issue of the Law on Public Debt Management No.20 / 2017 / QH14 approved by the National Assembly, the above shortcomings will soon be resolved on institutional aspects.

This law specifies the "list" of so-called public debts, including: Government debt, government guaranteed debt and local government debt. Debts owed and paid by SOEs are not included. This will be easier and more transparent for public debt calculation as well as for debt repayment liability.

Under the new law, the conditions for re-lending foreign loans of the Government are tightened to ensure effective use of capital, that is businesses must not suffer losses in the last 3 years and have no overdue debts. The conditions for granting the guarantee are also tightened for each entity group.

Together with perfecting the law, Mr. Ha Huy Tuan, Deputy Chairman of the National Financial Supervisory Commission, said that the strengthening of publicity and transparency was very important. This would bring many benefits such as creating trust with markets and creditors; help managers immediately realize problems to give timely and effective measures

In addition, Mr. Tuan recommended strengthening the risk management of the debt list, including the risk of loan currency, interest rates, exchange rates, solvency, credit and operations to minimize the costs and ensue the national financial security.

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Another measure is that although the Government has implemented quite well, in the coming period, the restructuring of state budget revenue and expenditure must be carried out in the direction of ensuring a reasonable, sustainable and transparent mobilization rate, reviewing the system of tax and fee to avoid overlapping, reducing fees to reduce inputs for businesses, reducing the proportion of indirect taxes, rising the proportion of direct taxes, and preventing and strictly handling tax evasion and losses of revenue and tax debts.