Lawmakers worried about Vietnam's public debt

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Vietnam's public debt will probably be higher than estimated, as the Ministry of Finance has missed including in its calculations several kinds of debt related to the government, lawmakers said at the National Assembly's meeting on Friday.

According to the National Assembly's Finance and Budget Committee, their review showed that the country's public debt will rise to stand at 58.9 percent of the Gross Domestic Product (GDP) as of this year end which is higher than the finance ministry's estimate of 54.6 percent.

The ministry didn't include the bonds that the government issues every year, estimated to be worth VND40 trillion (US$1.9 billion) on average, the committee said.

The loans of state-owned companies are also worrisome, it said.

Although the law on public debt management only targets loans guaranteed by the government, it is obvious that when state-owned companies go bankrupt no one except the government will have to pay their debts, the committee said.

Rep. Tran Hoang Ngan, meanwhile, said that as part of the public debt, Vietnam's external debt is currently worth some $50 billion, three times higher than its foreign exchange reserves.

"Compared to other regional countries, Vietnam's public debt stands at a higher ratio to GDP, and it faces a continuous trade deficit, low foreign exchange reserves, and long budget deficit," he said.

He pointed out that Thailand's ratio of public debt to GDP was 44.1 percent with foreign exchange reserves of $176 billion, while the public debt of Indonesia and Malaysia stood at 26.9 percent of GDP.

"Yet, many people still say Vietnam's public debt is in safe range, and that financial security is still guaranteed. Three years ago European countries said their public debt was safe, but now they are on the verge of bankruptcy," Ngan said.

He also criticized the fact that because the government keeps stating that public debt is still within a safe range, 63 provinces and cities as well as 49 central agencies keep spending more than budget every year.

In response to lawmakers' concerns, Finance Minister Vuong Dinh Hue said at the moment Vietnam pays debts with 14-16 percent of its budget, while international regulations say that as long as the debt-to-income ratio doesn't exceed 30 percent, it is still safe.

"Therefore we shouldn't be too optimistic or too worried about public debt," he said. The government is aware of the importance of how loans are taken and how they are used, as also how debt is repaid, he said.

According to Hue, as of December 31 this year, Vietnam's public debt will stand at 54.6 percent of GDP and will increase to some 58.4 percent as of the end of next year.

He said that the figures were calculated based on an estimated growth rate of 6 percent, adding that the ratio will be much lower in case Vietnam achieves the growth rate of 6.5 percent.

Hue suggested the National Assembly should allow the government to keep its public debt at between 60-65 percent of GDP as per its five-year plan.

Meanwhile, Deputy Prime Minister Vu Van Ninh told the press on the sidelines of the meeting that day that it isn't difficult to decrease public debt, as it will go down immediately when Vietnam stops taking loans.

"But we are in need of development, needing capital to do business," Ninh said. "What's important is how to use loans effectively."

However, while the public is currently in the safety zone, Vietnam shouldn't take it lightly in the future, and it needs to change its strategies for taking and using loans, the deputy prime minister said.

Public spending concerns

Also on the meeting's sidelines, Planning and Investment Minister Bui Quang Vinh expressed concerns over Vietnam's public investment cutback.

Vietnam does not have adequate infrastructure, but public investment will be cut down to just 20 percent of the budget, while other expenditures are too high, Vinh said.

He cited the report of the National Assembly's Finance and Budget Committee as saying that this year VND123 trillion ($5.8 billion) has been disbursed for public investment which is just 2.6 times higher than the Ho Chi Minh City's Ben Thanh Suoi Tien metro line project.

But this amount was distributed to tens of thousands of projects, including roads, health and education, in 63 provinces and cities, he said.

"If we don't cut spending to have more money for investment, our economy can't develop," Vinh said.

He said public investment is basically overspending, citing that this year, Vietnam's public investment was worth some VND180 trillion ($8.5 billion), of which overspending was VND140 trillion ($6.6 billion).

"Therefore we have to increase the floor of public debt a little bit and have some overspending for investment, otherwise we can't develop."

Sympathy needed

Transport Minister Dinh La Thang told the meeting that his ministry will focus on developing pubic transportation in major urban areas, and on key projects to guarantee economic development is boosted.

The minister suggested extracting part of the income from crude oil for key transportation projects.

Speaking of the ministry's proposal to adjust working and school hours in Hanoi as a measure to reduce traffic jams, Thang said they were aware of the impacts on people's lives caused by the adjustment.

However, "we hope that people and legislators will sympathize with us, because although each of us sacrifices a bit, what we gain is bigger...." He said it will benefit the country and the community, "which includes our own benefits, too."

The Ministry of Transport, under Thang's leadership, has caused quite a stir of late, advocating several measures to address traffic problems, including restrictions on the circulation of personal vehicles in major cities.

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