Tighten Government guarantees: sharp decrease

	Loans from China “easy but not cheap”
	Extension of foreign currency loans by the end of 2017
	The Law on Public Debt Management to be amended in 2017

2 risk projects refused

According to Mr. Vo Huu Hien – Deputy Director of the Department of Debt Management and External Finance, one of the important matters in debt management in 2016 is tightening the issue and management of the guarantee. Until now, most national key projects and constructions which were granted Government guarantees for domestic commercial loans have transferred into the mode of self-borrowing and self-repayment without Government guarantees.

The domestic commercial banks take self-responsibility for credit risks, contributing to reduce significantly the reserve debt liability of the budget and control the growth rate of public debts.

The evaluation of granting the guarantees was implemented in direction of tightening the grant of guarantee. The Ministry of Finance refused to grant the guarantees for 2 risk and inappropriate loans projects; evaluated and reported to the Prime Minister to grant the guarantee for an investment project in the electricity field, decreasing significantly compared to 2015 and the previous years.

Thereby, the total value of granted Government guarantees in 2016 was $US 170 million, significantly decreased against 2015 ($US 3.27 billion) on the guarantee value and reduced the pressures on the public debt in the coming years.

Especially, in 2016, the Department of Debt Management and External Finance proactively collaborated with foreign banks and project investors to implement active restructuring of loans through exchanges for enterprises to pay the loans before the deadline and carry out the final accounting for some foreign loans ensured by the Government.

Total original debt balances accounted before the deadline and clearance of the guarantees in 2016 was about $US 22 million, increasing the total debt paid before the deadline in the two years 2015-2016 to nearly $US 160 million, which contributed to reduce the debt balances guaranteed by the Government. This will be a tendency to be promotied in the coming period for restructuring of the public debt.

The management of projects after granting Government guarantees was enhanced through the establishment of periodic information and report mode from the projects granted the Government guarantees and lenders, thereby building a data base to keep track of the movements of capital withdrawal, debt repayment and financial situation of the projects and enterprises which were granted Government Guarantees to supervise and discover the risks of failing to repay in a timely fashion.

Until now, all projects granted the guarantees for domestic loans implemented repayment in a timely fashion and no cases arose where the Accumulation Fund had to pay in advanced. The foreign loan projects for financial restructuring were also gradually stabilized and impossible to pay the loans in person and might not borrow the loans from the Accumulation Fund to pay the debts.

Borrowing $US 5,222 million.

According to the Department of the Debt Management and External Finance, in 2016 when Vietnam became a country with average GDP and no longer enjoying a lot of incentives of ODA loans and incentive loans, the negotiation to sign foreign loan agreements was promoted.

On 23 December, 2106, the Ministry of Finance finished the negotiations and signed 36 loan Agreements with a total value of $US 5,222 million, 1.35 times higher than the same period in 2015, contributing to the preferential capital resource to compensate for the budget overspending and development investment.

Besides, 2016 was the first year implementing the loan withdrawal under the plan in accordance with the direction of the Government in order to closely follow the annual plans of loans and debt repayment approved by the National Assembly.

Debt Management and External Finance step by step collaborated with the State Treasury and the Department of Investment to deploy the capital withdrawal, and met the requirements for disbursement for the budget and investment projects, on the other hand ensuring the close control of the capital withdrawal. The total withdrawn foreign loans was estimated at $US 3,324 million, equivalent to 73,140 billion vnd (reached 74% compared to the whole year’s plan)

In 2016, the Department has signed 18 lending agreements with total value of $US 996 million.

Although, the Decree on lending in the localities was officially promulgated, Debt Management and External Finance actively notified Ministries to expand the financial mechanism applying the lending mode in the localities on the basis of the lending ratio framework submitted by the Ministry of Finance to all projects which were governed by the localities for loans from WB, ADB, etc, and in the localities joining the projects of prevention of climate change in the Mekong Delta and enhancement of the management of land and land data base for loans from WB, and projects of primary infrastructures in the Northeast, the Central area and the Highlands.

Vietnam’s banking sector looks stable for 2017 despite gloomy Southeast Asia outlook: Fitch The country still needs to address a high ratio of non-performing loans and low profitability.

In general, the mechanism of lending has been received actively by the localities, and showed remarkable progress in the access of the localities in capital mobilization, against the passive mentality, and dependence on the central authorities as before.