Vietnam plans to issue sovereign bonds overseas to refinance debt

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 Vietnam plans to issue $3 billion worth of bonds in overseas markets. File photo
Vietnamese government has announced its plan to issue bonds on overseas markets in an effort to refinance its debt, as local bond sales have slumped this year.
The plan will be submitted to the National Assembly's year-end session later this month, and new bonds will be issued in November, the government website reported on Monday.
The report did not reveal the amount. 
News website Saigon Times Online said the government will issue US$3 billion worth of bonds with the maturities of 10-30 years to refinance its debt in 2015-16.
The sales will not threaten the safety Vietnam's foreign debt, meaning that its ratio to public debt will remain under 50 percent by 2020, local media quoted Finance Minister Dinh Tien Dung as speaking at a meeting with the legislature's Standing Committee. 
In a comment on the plan, Phung Quoc Hien, chairman of the National Assembly's Finance and Budget Committee, said that it is probably the only possible solution, considering that bonds have not been selling well locally. 
Vietnam sold nearly VND127.5 trillion (US$5.58 billion) worth of bonds in the January-September period, down 39 percent year-on-year and equivalent to only half of the annual target, according to the finance ministry's figures.
The money raised was not enough to pay the government's debt expenses estimated nearly VND160.7 trillion ($7.11 billion) as of September 30, the ministry said.
Last year the government sold $1 billion worth of bonds in foreign markets in order to refinance its debt due in 2016-20. The bonds will be mature in 10 years with a coupon rate of 4.8 percent a year.
In May, in a historic move, Vietnamese government issued $1 billion worth of foreign bonds specifically for Vietcombank, the country's top lender by market value. The US dollar-denominated bonds will be due in 5-10 years at a rate of 4.8 percent. 
Shorter bond maturities
At the meeting, the finance ministry also sought legislators' opinion on its plan to diversify the terms of bonds instead of the minimum of five years at the moment.
Last November, Vietnam's legislature asked the government to stop issuing short-term bonds to offset the state budget's deficits. However, the lack of diversity has been blamed for making Vietnamese sovereign debt unattractive to many investors.
Nguyen Sinh Hung, chairman of the National Assembly, voiced his support for the plan, but advised the government to limit bonds' minimal maturity at three years, arguing that long term debt is better for the government. 
In its latest report, the finance ministry estimated Vietnam's public debt at 59.6 percent of gross domestic product, within the limit of 65 percent set by the National Assembly.
However, the Ministry of Planning and Investment released a report last month recalculating the public debt, putting it at 66.4 percent of GDP. The estimate was rejected by the finance ministry. 

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