HA NOI — Viet Nam's public debt index currently stands at a moderate and safe level, made up of mainly long-term debt and debt with preferential interest rates, according to Government reports.
The Ministry of Finance confirmed the information against rumours that the country's debt stood at a high level in comparison with its Gross Domestic Product (GDP), according to the Chinhphu.vn website.
As of 31 December 2011, foreign debt has been estimated at VND1,042 trillion (US$49 billion), or 41.5 per cent of GDP last year, and within the safety limit. Under a National Assembly resolution, Viet Nam will control outstanding public debt at below 65 per cent of its GDP by 2015 while Government and national debt is reduced to below 50 per cent, according to ministry statistics.
The World Bank and International Monetary Fund have recognised that Viet Nam's debt levels were under control and that the country fell outside the Debt Initiative for the Heavily Indebted Poor Countries (HIPCs) group.
Of the country's total debt, official development assistance (ODA) loans accounted for 75 per cent, with low interest rates in the majority.
Forty-year World Bank loans have 10-year grace periods with an interest rate of 0.75 per cent per year while 30 year Asian Development Bank loans also have 10 year grace periods, but with an interest rate of 1 per cent. Thirty-year loans from the Japanese Government have 10-year grace periods with an interest rate of between 1 and 2 per cent per year.
Currently, both domestic and overseas debt has been paid, with no bad debt in existence. Moreover, the borrowing structure has been changed by minimising foreign debt and increasing domestic debt to reduce dependence on overseas sources.
Compared to other developing countries with the same BB credit rating, Viet Nam's debt index is at average level.
To comply with safety limit objectives related to public debt indicators adopted by the National Assembly, the Ministry of Finance has implemented measures to control public debt repayments, amongst others.
The Ministry will continue to manage, supervise and allocate loans towards the development of infrastructure. It will closely control preferential foreign loans and keep watch on the efficient use of loans and debt payments while minimising State budget subsidies. — VNS