State Treasury: Mobilise funds effectively, saving loan charges for State budget

A project using government bonds conducted disbursement through Hai Duong State Treasury. Photo: Thùy Linh

Bond issuance incorporate with re-structuring list of debts of the Government

According to the State Treasury, to ensure the completion of capital mobilisation plan in 2020 and at the same time, maintain the coupon rate of Government’s bond to prevent from sharp fluctuation and market stablisation, the State Treasury has cooperated and recommended the Social Insurance of Vietnam and Deposite Insurance of Vietnam actively participate in bidding for Government bonds. From the beginning of the year to the latest session of bidding for Government bonds which took place in Hanoi Stock Exchange (on August 12), State Treasury had mobilised VND 157,723 billion. Along with that, the coupon rate of Government bonds had not skyrocketed, step by step follow close on an interest rate of Government bonds transaction in the secondary market and State Treasury gradually increased the mobilised capital volume to meet the expense needs of the State budget.

The capital mobilisation for State budget and development investment through the issuance of Government bonds has become increasingly modernised in accordance with international practices, openness and transparency. Government bond issuance is closely linked to the restructuring of the Government's debt portfolio towards sustainability, safety and minimising the risk of refinancing of the State budget. In fact, the volume of Government bond issuance has met the need of balancing the State budget; the average term of debt portfolio of government bonds increased from 1.84 years in 2011 to 7.38 years in 2019.

The State Treasury affirmed the capital mobilisation of the State Treasury has contributed to cutting costs of interest payments for the State budget; investor structure has been improved, gradually reducing dependence on commercial banks. The market has initially had the participation of foreign investors with the proportion of foreign investors holding government bonds accounting for 6.1% of debt in 2019. In general, the management of funds has been stepped by step linked with the State budget management and debt management, contributing to reducing loan charges for the State budget.

Diversify the term of government bonds

In the third quarter of 2020, the State Treasury aimed to mobilise VND 130,000 billion of government bonds. However, during implementation, the State Treasury could adjust the issuance volume of bond terms to suit the market situation and the capital requirements of the State budget.

Until the end of the year, the State Treasury will continue to strictly, safely and effectively manage the State budget; completing the task of capital mobilisation in 2020 assigned by the Ministry of Finance with reasonable interest rates, saving loan charges for the State budget and stabilising the market. At the same time, debt restructuring will be carried out through swapping Government bonds under the approved plan.

The State Treasury manages the issuance volume of Government bonds to tally with market conditions, mainly meets the requirement of the Government in the repayment of principals and appropriate with the disbursement schedule of investment capital construction. Specifically, the State budget revenue and expenditure will be closely followed, investment capital disbursement progress, repayment of principal plan and market situation; continue to organise and manage the budget, ensuring payment needs of the State budget and units having transactions with the State Treasury.

At the same time, the State Treasury will diversify term bonds, focusing on issuing bonds with a term of five years or more, and increase the issuance volume of long-term bonds (from 10 years or more) to restructure the debt portfolio of Government bonds. On that basis, flexibly and reasonably managing coupon bonds, grapsing the market, taking advantage of favourable market conditions to issue long-term bonds with low interest rates. In case the market is not favorable, the Government bonds will be issued with 2 - 3 year term with security volume within the limit allowed by the National Assembly.

The State Treasury will also manage coupon bonds reasonably, in line with the direction of monetary policy to stabilise the market, save costs for the budget; implementing debt restructuring through government bond swaps after the Prime Minister approves the debt repayment plan in 2020 and the domestic debt restructuring project for 2020-2021.

In the coming time, the State Treasury will develop and submit to the Ministry of Finance a plan for the management of the State budget quarterly and annually to tally with reality and in accordance with legal regulations; continue to improve quality of cash flow forecasting and state budget management in order to ensure safety, efficiency, fully and promptly meet the payment needs of all levels of the budget, the unit opens transaction accounts at all times.