Vietnam effectively controls public debt, improves national credit rating

DNHN - According to a Ministry of Finance report, two significant accomplishments during the 2021–2023 era were reducing public debt and raising the country's credit rating.

The annual debt safety indicators have been maintained stably and in compliance with the ceiling and safety thresholds approved by the National Assembly.

Public debt by the end of 2023 accounted for about 37% of GDP, much lower than the ceiling of 60%. Government debt reached about 34% of GDP, also much lower than the safety threshold of 50%. In addition, this debt level is much lower than the average level of countries rated BB at 52.8% of GDP and BBB at 54.9% of GDP in 2023.

The positive debt structure, with domestic debt increasing and accounting for about 71% of government debt, has contributed to minimising exchange rate risks. Domestic debt is mainly government bonds with long issuance terms, minimising the risk of debt rollover. The average issuance term of government bonds is about 12.4 - 12.5 years, ensuring compliance with Resolution No. 23/2021/QH15 of the National Assembly on the National Financial Plan and Public Debt Borrowing and Repayment for the 5 years of 2021-2025.

In addition, the interest rate on government bond issuance is carefully managed, ensuring harmony with monetary policy. The average issuance interest rate of the government bond portfolio is expected to be about 3.3%/year in 2023, a decrease of 0.18 percentage points compared to the level in 2022, which is implemented in the context of global interest rates continuing to decline.

It is also noteworthy that foreign debt in the Government’s borrowing structure has gradually decreased. The foreign debt portfolio is still mainly focused on loans with long-term and preferential interest rates, contributing to increasing sustainability in the face of global exchange rate fluctuations.

According to Mr. Truong Hung Long, Director of the Department of Debt Management and External Finance (Ministry of Finance), from 2021 to 2023, public debt management has achieved remarkable results. Public debt safety is ensured within the ceiling and warning thresholds approved by the National Assembly while mobilising capital for the state budget and development investment. Making full and timely debt repayments has also contributed to improving the national credit rating.

Many reforms in public debt management have brought about effectiveness and sustainability, according to Mr Andrea Coppola, World Bank Lead Economist in Vietnam. There has been significant progress in this work, including strengthening the legal framework and institutional management. The determination of the political system, under the leadership of the Party, the National Assembly, and the Government, together with the contributions of all levels, sectors, and localities, especially the financial sector, has kept public debt within safe limits.

The Ministry of Finance has proposed many important measures to manage public debt and stabilise the macroeconomy. The Government has implemented a policy to adjust the debt structure by increasing the proportion of long-term debt, reducing the proportion of short-term debt, and applying preferential interest rates and long-term terms. At the same time, increasing domestic borrowing and reducing foreign borrowing has helped reduce financial costs for the budget and reduce financial risks. This is done in parallel with strengthening public debt management and monitoring.

The Ministry of Finance has also been successful in optimising budget revenue and expenditure by narrowing the revenue gap and promoting tax reform. The Government has cut unnecessary expenses, strengthened budget management, and reformed institutions to make budget spending more efficient. At the same time, strengthening the Government’s financial capacity and developing the financial market are also an important part of this strategy.

Many economic experts believe that the measures implemented by the Government will keep the country’s financial situation stable and facilitate socio-economic development. However, to ensure that public debt management will continue to be effective and sustainable in the future, it is necessary to continue to strengthen public debt management and financial institutional reform.

Thanh Tra