Tighten Government guarantees: Reduce “enormously”

In 2016, the Department completed and signed 18 loan contracts with a total value of about $US 996 million. Photo: Nguyen Thanh.

Refuse 2 risk projects

According to Mr. Vo Huu Hien – the Deputy Director of DMEF, one of the important highlights of the debt management was that the guarantee grant and management were tightened in 2016. So far, most national projects and works which had been advocated to grant Government guarantees to borrow domestic commercial loans were transferred to borrowing method and repayment without government guarantees.

The domestic commercial banks accepted credit risk that contributed to reduce significantly allowance debts of the State budget and restrain the speed of public debt.

The appraisement of the guarantee grant was made in the direction of tightening the guarantee grant. The Ministry of Finance refused to grant 2 risk loan projects or inappropriate loan projects; an investment project in the power field was appraised and submitted the Ministry of Finance to report the Prime Minister grant the Government guarantee, this number was down significantly from 2015 and previous years.

Since then, the total value of the granted government guarantee in 2016 was $US 170 million, decrease significantly compared to 2015 ($US 3.27 billion) in value of the guarantee, this helped to reduce the pressure on the public debts in the coming year.

In particular, in 2016, the DMEF cooperated actively with the foreign lending banks and the project owners to restructure loans proactively through the exchange, so that, the enterprises could repay before the deadline and pay off some foreign loans guaranteed by the Government.

Total of the principal outstanding loans paid off before the deadline and released the guarantees was about $US 22 million in 2016, increased total debts repaid early to nearly $US 160 million in two years from 2015 to 2016, contributed to reduce debt balances guaranteed by the government. This will be a tendency that needs to be promoted in the coming period to restructure public debt.

The management of projects after granting the government guarantees has been strengthened through the establishment of information regime, periodic reports from the projects granted the guarantees and lenders, on that basis, a data base was built to track fluctuations in capital withdrawing, loan repaying, the financial situation of projects and enterprises granted the guarantees to monitor and detect the payment default of projects.

So far, all projects granted domestic loan guarantees have been fully repaid on time, the Cumulative Fund has not paid for any project. Foreign loan projects implemented financial restructure stabilized gradually, paid debt themselves and did not borrow to pay debts from the Cumulative Fund.

Borrow $US 5,222 million

According to the DMEF, in 2016, when Vietnam has became a country with middle income, there is little opportunity to receive ODA loans and preferential loans, negotiating and signing foreign loans are concentrated to increase.

To December 23rd, the Ministry of Finance completed the negotiation and signed 36 loan agreements with the a total converted worth of about $US 5,222 million, 1.35 times higher than the same period in 2015, contributed to add preferential capital for the budget deficit compensating for development investment.

In addition, 2016 was the first year to supervise loan withdrawals under the plan directed by the Government to stick close on the annual borrowing and repaying plan which were approved by the National Assembly.

The DMEF has been gradually in coordination with the State Treasury and the Investment Department for implementation of withdrawal task, on the one hand, to meet the requirements for budget disbursement, on the other hand, to ensure close control of withdrawals. The total value of foreign loan withdrawals was estimated at $US 3,324 million, equivalent to 73,140 billion vnd (reached 74% compared to the annual plan).

In 2016, the Department completed and signed 18 on-lending agreements with a total value of about $US 996 million.

Although the Decree on on-lending in localities has not been issued formally, the DMEF reported to the Ministry initiatively to popularize the financial mechanism applying the methods of on-lending in localities on the basis of the on-lending rate framework, the Ministry of Finance submitted the framework for all projects where localities are the governing agencies to borrow WB, ADB, the localities participated in projects of resisting climate change in the CuuLong river delta, strengthening land management and land data base with WB loans, basic infrastructure projects in the Northeast, Central region and Highlands.

In general, the on-lending mechanism for localities has received positive assessment of localities, it shows a marked improvement in the local approach when raising capital, unlike the passive mentality, with dependence on Central agencies.

Construction of the Public Debt Management Act amendment is a key task, and oriented strategy in 2016 and 2017.

Up to now, the Ministry of Finance has completed research documents on the content of current regulations and the issues for amending the Public Debt Management Law; completing the report to the Prime Minister to inform the National Assembly, and the Standing Committee of the National Assembly to propose content of the Public Debt Management Law to put on the laws and ordinances building programs of the National Assembly in 2017...

It is expected that no later than March 2017, the Ministry of Finance will complete the first draft to widely consult on the website of the Ministry of Finance