Vietnam has sold only half of the bonds it had hoped to this year, the Finance Ministry said on Friday, complicating efforts to raise funds for spending projects as public debt climbs.
Just VND127.5 trillion ($5.67 billion) was raised via government bond auctions in the first nine months of 2015, reaching only 51 percent of the target, the ministry said.
Bonds have been a key source of funds for government spending. The country wants to boost infrastructure, including transport and energy projects, to meet rising demand as the economy expands and record levels of foreign investment flow in, mostly into manufacturing.
Public debt in 2014 was at 59.6 percent of gross domestic product according to government data and the Finance Ministry in late July had to seek a VND30 trillion loan from the central bank to offset the state budget.
The headquarters of VIetnam's State Treasury.
Trinh Hoai Giang, vice president of Vietnam Bond Market Association, said the dampened appetite for bonds was due to the State Treasury offering them only for tenures of five years and more.
Commercial banks, which have been dominant buyers in recent years, prefer to invest in short-term bonds, Giang said.
"Banks also boosted their lending activities recently, reducing the amount they spend on government bonds," he said.
Banks have delved into the bond market, which until this year was one of the most active in Asia, amid tighter lending in the aftermath of a crippling bad-debt crisis Vietnam is starting to emerge from.
Credit growth for its banks could accelerate to 16.5 percent this year, the central bank said recently, which would be one of the fastest rates in Asia and beating a government target of 13-15 percent. Loans growth was 14.16 percent in 2014.