After denying reports that Vietnam's public debt has already exceeded the safety limit of 65 percent of gross domestic product (GDP), the government finally recalculated its financial obligation. And the news is not very good.
According to new estimates by the Ministry of Planning and Investment, the total debt figure for 2014 should be 66.4 percent of GDP, instead of the previously reported 59.9 percent.
News website Saigon Times Online on Sunday cited a ministry's report as saying that the government has, for the first time, included loans that state-owned enterprises and social insurance funds may default on. The government is obliged to pay off these loans if the companies and insurance are no longer capable of doing so, the report said.
The new addition brought the total public debt to over VND2,650 trillion ($116.18 billion).
The ministry, however, refused to count the central bank's debt as part of the national debt, saying that there are no default risks.
Unlike international institutions such as the World Bank and the International Monetary Fund, Vietnam's government does not include borrowings of the central bank, state-owned enterprises, and insurance funds in its public debt, a practice that has been criticized by economists for years.
Estimates vary and the World Bank recently reported that Vietnam's public debt exceeded US$110 billion. It was higher than the government's last estimate, which was nearly VND2,400 trillion ($104.76 billion), Saigon Times Online reported.
Many economists believe that Vietnam's public debt has already been higher than its GDP, if state-owned enterprises' debts are included.
In its last report to the National Assembly, the government forecast public debt will hit the assembly's limit set at 65 percent of GDP in 2017, promising that it will try to lower the ratio to 60.2 percent by 2020.
But instead of trying to reduce the debt level, the Ministry of Planning and Investment proposed lifting the safety limit.
In its report, the ministry recommended a new safety limit on Vietnam's public debt at 68 percent of GDP over the next five years, saying that although Vietnam is now under pressure to repay debts, it is not facing a high bankruptcy risk.
The ministry jumped to that conclusion even after it conceded that many fiscal indicators were not very positive.
For instance, Vietnam's debt service ratio surged from 33 percent of revenues in 2013 to 38 percent last year and is expected to hit 45 percent this year. Its budget deficit remains high and is set to stay around 5.43 percent of GDP this year and the next.
The country also borrowed more to pay off existing loans, from VND80 trillion last year to VND130 trillion ($3.49 billion) this year.
The ministry also pointed out the fact that Vietnam is a lower-middle incomer with rapidly aging population, and low labor productivity, it said.
It noted Vietnam's public-debt-to-GDP ratio is much higher than those of other developing countries and its regional neighbors, such as Thailand's 42.36 percent.
Regardless of all of this, the ministry reassured that Vietnam's payment capacity is still high, considering most of the debts are from local creditors and financing options are available.
Vietnam's external debt dropped from 49 percent of its total debt in 2013 to 46 percent last year, it said.