Government plan for $3 bln overseas bond issue could make public debts unsustainable

Thanh Nien News

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Vietnamese dong banknotes are arranged for a photograph inside a Ho Chi Minh City Housing Development Commercial Joint-Stock Bank (HDBank) branch in Ho Chi Minh City. Photo: Bloomberg Vietnamese dong banknotes are arranged for a photograph inside a Ho Chi Minh City Housing Development Commercial Joint-Stock Bank (HDBank) branch in Ho Chi Minh City. Photo: Bloomberg

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The government has sought lawmakers’ approval to issue US$3 billion worth of bonds overseas to refinance its domestic debts due in 2015-16.
Though it has assured this would not threaten the nation’s financial security, a closer scrutiny of official and unofficial fiscal numbers makes the claim dubious.
In its latest report to the National Assembly, the government estimated the country's public debt would be equivalent to 61.3 percent of gross domestic product by year end, within the safety limit set at 65 percent.
However, the assembly's Finance and Budget Committee released a report early last month casting doubts on the government's optimistic forecast.
It said the government would possibly be unable to keep public debt at that level since official development assistance loans are likely to exceed its estimates of VND20 trillion ($884.5 million).
The committee's findings were confirmed by Deputy Finance Minister Do Hoang Tuan Anh at a media conference two weeks later.
He said ODA disbursement would be around VND50 trillion ($2.21 billion) by year end, taking public debt to 63.2 percent of GDP -- a level the government did not expect to hit until next year end.
Increasing foreign debt
While the government claims that by 2020 foreign debts would be lower than the sustainability threshold of 50 percent of GDP, it has never taken into account foreign loans obtained by businesses, except when it guarantees them.
But the government should never take its eye off the ball, especially given that many big corporations, including in the public sector, have made bonds issues overseas worth an average of $200 million.
State-owned Vietinbank, for instance, sold $250 million worth of bonds overseas in 2013.
Thailand and Indonesia were caught up in the 1997 financial crisis partly because their businesses had borrowed heavily from foreign sources.
Original Vietnamese story by Lan Nhi. It can be found here in Saigon Times Online

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