Public debt is near ceiling limit


VietNamNet Bridge – If public debt increases by VND385.375 trillion as estimated, Vietnam’s total public debt would climb to VND2,993 trillion, or 64 percent of GDP.

In late July 2016, the National Assembly approved the 2014 state budget balance with total receipts of VND1,130,609 billion, expenses of VND1,339,489 billion and overspending of VND249,362 billion. The overspending is 11 percent higher than estimates. 

The 2013 balance sheet also showed the real state budget deficit higher than estimates by 46 percent. Most recently, the second information update in April 2016 found that the state budget deficit in 2015 could be 13 percent higher than the estimates.

The ratio of the state budget deficit to GDP was 6.6 percent in 2013, 6.3 percent in 2014, 6.1 percent in 2015 and is estimated at 5.5 percent in 2016. The calculations may not be suited to international practice as the figure includes money for principal payments.

However, Bao Viet Securities Company’s (BVSC) research team believes that even when deducting the amount of money for principal payments, the deficit would still be very high, at 4.25 percent of GDP, higher than the limit of 3 percent urged by IMF. 

BVSC has warned that the public debt may increase by VND385.375 trillion by the end of 2016 and this would not only come from the state budget deficit. The pressure on the public debt may also come from government bonds, government loans for relending and the government’s guarantees for loans.

Under Prime Minister Decision No 1011, the government plans to borrow VND452 trillion in 2016, of which VND95 trillion would be borrowed for swapping debt.

The Ministry of Finance’s recent report showed that Vietnam’s total public debt by the end of 2015 had reached 62.2 percent of GDP. 

Meanwhile, the General Statistics Office (GSO) report said public debt had reached VND2,607,960 billion by the end of 2015. 

Supposing that the public debt increases by VND385,375 billion, the total public debt would be VND2,993,335 billion, or 64.4 percent of GDP by the end of 2016.

And if the real state budget deficit in 2016 is higher than 10 percent like in previous years, the ratio of public debt on GDP may be up to 64.9 percent under the BVSC scenario designed for cautious economic development, or 64.6 percent or 64.5 percent under the government’s two scenarios on economic development.

The successful campaigns of issuing government bonds by the end of July 2016 will allow the government to take initiative in debt payment and spending. 

However, even if the government bond issuance plan succeeds, it will still need to borrow VND86 trillion more from the social insurance fund and the State Capital Investment Corporation (SCIC).


Photo: CBR Investment AG