\In the coming years, if the situation continues with further spending in investment and development, public debt will exceed the allowed limit, threatening Vietnam’s financial security.
According to the Ministry of finance, although public debt still remains under the allowed limit, government debt has reached 50.3 percent of GDP, exceeding the allowed limit by 0.3 percent. This is because gross domestic product (GDP) in 2015 was down by over 13 billion USD compared to the forecast. The national assembly also added a supplement amount of 1.3 billion USD in the disbursement of ODA.
"Government debt takes up the biggest proportion in total public debt. Therefore, as government debt exceeds limits, it is difficult to keep public debt under the ceiling that has been set." - Dr. VU DINH ANH, Economic Expert
From 2011 to 2015, in order to meet the spending demand for development, government debt doubled in the previous period. Government bonds increased by 3.5%, most of which were short-term domestic loans.
"From 2011 to 2013, short-term capital accounted for 70%. From 2015-2017, we have to pay that debt. It creates difficulties for the state budget in paying off debts and consequently, public debt is higher." - TRUONG HUNG LONG, Head, Debt Management and External Finance Department, Ministry of Finance.
According to the tentative financial plan for the 2016-20 period, the capital needed for investment and development will reach 178.57 million USD. Meanwhile, the state budget can only provide 30%.
"Construction of these projects must be in line with the official development assistance and preferential loans the government has signed agreements to receive.
We should facilitate the investment in line with the capacity of the state budget. Only if development becomes higher than planned will we need to increase investment. If we raise capital by all means, it will cause difficulties for financial policy." - TRUONG HUNG LONG, Head, Debt Management and External Finance Department, Ministry of Finance.
Over the past 5 years, Vietnam’s state budget deficit stood above 5%. This figure needs to be reduced to 4% in 2020 to ensure the safety of financial policy. It is imperative that increasing spending for future investments be considered cautiously to keep public debt under the allowed limit.
