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Vietnam’s public debt to increase

Vietnam’s public debt to increase

Saturday 26, 12 2020
It is expected that the public debt to GDP ratio will increase again but still remain within the amount regulated by the National Assembly.

According to the Ministry of Planning and Investment, the legal framework for effective public debt management continues to be improved and strengthened. The Law on Public Debt Management 20/2017 / QH14 dated November 23, 2017 and guiding decrees have been issued.

Public debt is on the rise at the end of the year 

The project to restructure domestic debt portfolios for 2017 - 2020 and the legal basis to issue debt instruments to mobilize capital for the state budget have supported the restructuring of government debt in a sustainable way, which helps minimize risks of debt term.

In particular, public debt decreased from 61.4% of GDP in 2017 to about 55% of GDP at the end of 2019. On average, the growth rate of public debt decreased from 18.1% in the 2011-2015 period to about 5% per year in the period of 2017-2019. At the same time, interest rates have decreased while loan terms have been expanded gradually.
Public debt is on the rise at the end of the year
It is expected that by the end of 2020 the public debt to GDP ratio will increase again due to the adverse macro effects but remain within the amount regulated by the National Assembly.

The use and management of public assets have also been improved, helping to exploit assets and infrastructure in each field and each Vietnamese agency at central, local and overseas more efficiently.

Regarding the law on state budget, the Ministry of Planning and Investment said that public debt and management of public assets continued to be improved. The decentralization of state budget management has also been completed by ensuring the leading role of the central budget but promoting the initiative of the budget at all levels. 

A recent report on public debt in the 2016-2020 period made by the government also shows that the ratio of public debt to GDP has gradually decreased from 63.7% in 2016 to 55% in 2019. The Government debt / GDP ratio decreased correspondingly from 52.7% to 50.8% in 2020. The growth rate of public debt decreased from an average of 18.1% / year in the 2011-2015 period to around 6.8% / year in the 2016-2019 period.

50% of business conditions have been cut

The Ministry of Planning and Investment also said that economic institutions continue to be improved to facilitate the development of the private sector. In the period of 2017 - 2020, the legal framework facilitating the development of small and medium enterprises has been paid attention, and these enterprises are also supported to better access legal issues.
50% of business conditions have been cut
Between 2017 and 2019, the Government issued nearly 40 guiding documents related to reforming business conditions, and cut, removed and simplified 50% of business conditions.

With regard to the equitization and divestment of state capital in enterprises, the correctness and fullness of the value of the enterprise have been ensured. Land handling has been separated from state capital transfers. The capital of state-owned enterprises invested in other enterprises has also been preserved at the highest level.

Regarding foreign direct investment attraction, projects with advanced technology transfer have been actively selected. Specifically, important orientations on improving institutions and policies to improve the effectiveness of foreign investment cooperation to 2030 have been issued.

However, there are still many limitations. For example, the equitization process is still slow compared to the set schedule, and the operational efficiency of state-owned enterprises is not high. Institutions to support private sector enterprises are not really effective. Businesses in this sector are small, and their financial technology capacity is limited. The leading role of businesses is still limited, especially those in the agricultural sector.

Source: cafef

Categories
Financial News

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