Experts urge gov’t, SOE reform as Vietnam debt pressing

By Nguyen Nga – Tran Tam, Thanh Nien News

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Vietnam’s public debt has been increasing over the years and its burden on each citizen has also weighed heavier at nearly US$880 now.
The global debt clock on Saturday showed Vietnam’s public debt at more than US$80.2 billion, up 11.2 percent over last year, and accounting for 48 percent of the GDP.
That makes $887.74 per each citizen in the 90.5-million strong country.
The debt map colors Vietnam light orange, which is the third highest rank out of eight in terms of amount of debt.
Do Thien Anh Tuan, a lecturer at the Fullbright Economics Teaching Program which is a cooperation between the Ho Chi Minh City Economics University and the Harvard Kenedy School, said Vietnam’s annual public debt has been increasing – 8.6 percent in 2012, 12.6 in 2013 and possibly 11.2 percent this year.
The public debt per person also increased from $720 in 2012, $804 in 2013 and is expected to climb to $888 by the end of this year.
Tuan said one factor pushing the public debt is that the stagnant economy caused many businesses to shut down and people have tighten their belts, reducing state budget income. He said the government still needs to invest in the public sector and thus has to borrow more money.
Referring to the clock’s posting of Vietnam’s public debt per GDP according to the International Monetary Fund, he said the figure did not truthfully reflect the situation.
Tuan said debts of state-owned enterprises need to be included to make a better assessment of the burden and the threat.
“If the debts of state-owned enterprises are counted, Vietnam’s public debt could even pass GDP, far above the rate limit of 65 percent set for financial development through 2020.”
Economist Le Dang Doanh, former head of the Central Institute for Economic Management, said Vietnam’s public debt is now 106 percent of the GDP.
The economists said Vietnam’s economy is heavily dependent on the state sector, thus strong reforms in public investments and SOEs are needed to reduce public debt.
Doanh said while investments in the private sector have dropped, the government still tried to sustain growth by borrowing money.
“If we borrow for investments, it will create new products to contribute to the GDP and we can have tax money to pay debt. But if we borrow it for spending, it will be lost and not generate profit.”
He said there should be a “grand” intervention into state budget spending, like making regular cuts to government spending and minimizing the government management mechanism.

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