Public debt repayment pressures mounting

The amount of debt due at certain points in time is very high, threatening liquidity and requiring Vietnam to borrow more to pay immediate dues, Hoang Quang Ham, a delegate of Phu Tho Province, told the National Assembly. 

“In 2019, 9.3 percent of the government’s internal debt is due. Between 2019 and 2021, the figure is 32.7 percent.”

Ham said to meet its repayment obligations in the 2019-2021 period, the country needs to borrow VND700 trillion, and at times it will have to borrow up to VND20-40 trillion ($858 million – $1.72 billion) a month. 

Public debts include debts of central and municipal/provincial governments and government-guaranteed debts. The government’s internal debt is debts it owes to lenders within the country. In Vietnam, the internal debts are domestically-issued government bonds.

Delegate Pham Dinh Toan of Hung Yen Province said the situation of public debt has improved, but it is still high and Vietnam cannot be complacent when its revenue sources are not sustainable. 

Toan  pointed out that in the past years, state budget revenue has surpassed projections, but the revenue has mainly come from land and natural resources. “This is a one-off revenue, unsustainable and not a long-term option because this resource is finite.” 

The fact that revenues from production and business activities have not matched projections means that enterprises are still facing difficulties, that Vietnam has not established a solid state budget revenue base, and needs to improve the business environment, he said.

Concurring with this view, delegate Ham of Phu Tho said that the state budget’s current state is not sustainable, with a large proportion of income from land or natural resources, which is rising. 

While in 2016, revenue from oil and land made up 14.8 percent of the national budget, this rose to 15.7 percent and 17.6 percent in 2017 and 2018 respectively. At the same time, tax collection from enterprises was lower than expected, he noted.

“Small and medium enterprises account for 98.3 percent of all companies registered, but only 40 percent them were profitable,” Ham said, adding that production capacity and operational efficiency of domestic enterprises are still low.

According to a recent report by the Ministry of Finance (MoF) to the National Assembly, Vietnam’s public debt is estimated at 58.4 percent of GDP, or $136.75 billion, the lowest since 2015. It is also well below the 63.9 percent target set by the Ministry of Planning and Investment last August.

However, MoF officials have also said that Vietnam should not enter into more debt as repayment pressures are mounting.