After Vietnam’s public debt hit US$70 billion in late 2013, economists began to express concerns about the country's financial future.
A recent report from the finance ministry revealed that Vietnam’s public debt rocketed from VND889 trillion in 2010 to VND1,500 trillion in 2013.
While overseas loans increased slightly over the four-year period, domestic loans -- which the government obtains through selling bonds to local banks -- climbed sharply from VND359 trillion in 2010 to VND753 trillion in 2013, according to the report.
The report also predicted the country’s public debt would rise, from the current 60 percent, to 64.9 percent of GDP in 2016.
While the government still considers this ratio “safe," economists don’t quite agree.
“Vietnam’s state budget collection is very high, more than 21 percent of GDP,” said Le Dang Doanh, former head of the Central Institute for Economic Management. “However, it’s not enough to cover spending. As a result of our deficit, we have to rely on loans. This is very dangerous."
He urged the government to control spending and investment to stop waste.
Economist Nguyen Minh Phong, meanwhile, recommended the government raise taxes on tobacco and alcohol as well as crack down on tax evasion to help increase state budget collection.
“Vietnam has found it more difficult to obtain overseas loans following several major scandals, particularly the Vinalines scandal. The government has had to increase borrowing from local banks through bond issuance,” said Phong, “But it doesn’t matter whether the debt is foreign or domestic. The problem is… the public debt itself -- VND1,500 trillion -- is too high.”