The Minister of Finance, Mr. Dinh Tien Dung justifies the reason for not disbursing 16,000 billion vnd of government bonds

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The Minister of Finance, Mr. Dinh Tien Dung.

The mobilization of government bonds nearly reaches the target, while disbursement is still very low. Thus, is the use of loans inefficient, dear Minister?

The issuance of government bonds rarely shows favorable developments in the first 6 months of the year, although the interest rate in the currency market has tended to rise. As a result, in the first 6 months, the Government has mobilized 187,700 billion vnd of government bonds, reaching 83% of the plan. Thus, the Government will be relieved in mobilizing government bonds in the last 6 months of 2016.

The investment in State budget and Government bonds in the first 6 months of 2016 was a little bit slow. Thus, in the first 6 months of 2016, the disbursement of government bonds is very low, only 23% of the plan.

Therefore, the Finance and Budget Committee of the National Assembly stated that the slow disbursement of government bonds has caused wastes of state resources. What do you think about this statement?

In theory, raising a huge amount of capital but using much less will cause wastes of resources because this amount of money is a loan, which requires payment of interest. But in fact, the mobilization and disbursement of government bonds is not the case.

Specifically, with 187,700 billion vnd of government bonds, from the beginning time of the year, the Government has disbursed 82,000 billion vnd; 23.000 billion vnd in 2015; paid government bonds of 66,600 billion vnd years ago. Thus, the money was raised but has not been yet disbursed only about 16,000 billion, equivalent to 8.5% of the total amount raised, not more than 100,000 billion vnd (the total mobilized amount minus the amount of disbursing) as many people say.

I think the amount of 16,000 billion vnd of government bonds which has not been fully disbursed is logical.

Can you explain why this use of government bonds in this year is more efficient than that in previous years?

In 2010, the interest rate of government bonds was on average of 10.85% / year and in 2011, 2012 and 2013, it was 11.9% / year, 10.03% / year and 7.96% / year respectively. The interest rate of mobilization of government bonds in 2014 and 2015 decreased, but remained at 6.81% / year and 6.34% / year. In the first 6 months of this year, the interest rate of mobilization of government bonds was on average of 6.4% / year, but compared to the previous term of 6.8 years - much longer than before, so the real interest rate is lower than that in the previous time. State budget has been raised at low interest rate to pay the previous debt (debt swap) with interest rate of 10-11% / year, this is clearly effective.

The second effectiveness, in 2011, 2012 and 2013 the average duration of government bonds was only 1.84 years, 2.03 years and 2.8 years respectively. In 2014 and 2015, the Ministry of Finance actively mobilized the long-term government bonds to restructure the portfolio of government bonds, but the average duration of government bonds was only 3.1 years and 4.44 years.

The use of short-term loans for long-term investment not only created risks, but also accelerated obligations of debt repayment and the huge pressure of annual debt payment. We are glad that, in the past 6 months, the time limit of mobilization of government bonds was extended to 6.8 years on average, the number of government bonds with a term of 10-15 years is increasing, so we have extended an average duration of government bonds up to 5.04 years.

However, the duration of the Vietnamese government bonds is still much shorter than that in other countries in the world. In the upcoming time, what will the Ministry of Finance do to prolong the mobilization?

Resolution 99/2015/ QH13 on the estimate of State Budget in 2016 regulates the issuance of government bonds with a term of 3 years to less than 5 years with a maximum limit of 30% of the total volume of issued government bonds. From the beginning of the year, this type of short-term bond has been released very little, but the total volume of issued government bonds has reached 83% of the plan, therefore, from now to the end of the year, this kind of government bonds will be also released at a limited quantity.

It is in the short term, but what happens in the long term, dear Minister?

We are discussing with Vietnam Social Insurance to bond the entire amount of the loan which the state budget has borrowed Social Insurance. According to calculations, from 2023, the Social Insurance will cover source (social insurance revenue is less than the amount of expenditure), which means the loan that the state budget has borrowed from the Social Insurance valid for at least 7 years. Thus, when the entire amount of the loan is bonded, the portfolio of government bonds will also extend from 7 to 10 years.

Currently, commercial banks are holding 80% of the total number of issued government bonds, so the loans from the Social Insurance Agency are bonded together with the issuance of policies and mechanisms to encourage insurance companies, insurance funds, pension funds to participate in the bond market, commercial banks will only hold about 50% of government bonds, creating conditions for the bond market and currency market will be much stronger and healthier.

Therefore, although the National Assembly has given a "green light" to mobilize $ 3 billion of government bonds in the international markets, but up to now, why has the Ministry of Finance not done yet?

Since early this year, the domestic bond market has been quite good. Therefore, although the National Assembly allowed us to issue 3 billion USD of government bonds in the international markets, we have not done yet.

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The slow issuance of government bonds in the international markets is in the strategic restructuring of government bonds, which regulates the limitation of foreign borrowings and boosts domestic borrowings.