Servicing of Vietnam’s public debts, including those borrowed to pay older loans, is estimated to account for 26.2 percent of the government’s revenues this year, higher than the 25 percent cap that is in place, Prime Minister Nguyen Tan Dung said.
Public debt has rapidly increased in recent times, he said at the opening session of the National Assembly Monday.
However, the country’s total debts, including government debts and the state’s overseas loans are still at a safe level of less than 65 percent of the GDP, he said.
Public debts rose to 54.2 percent of the GDP in 2013, and are expected to rise further to 60.3 percent this year, according to the government’s socioeconomic report at the meeting.
According to a report presented by Minister of Finance Dinh Tien Dung, the government proposes to seek legislative approval for a budget deficit of 5.3 percent of GDP this year and 5 percent in 2015. It is aimed at enabling repayment of short-term loans and meeting the country’s security needs, the report said.
This could take public debts to 64.5 percent of GDP next year.
Phung Quoc Hien, chairman of the NA’s Finance and Budget Commission, said public spending is within the stipulated safe limit but close to the ceiling, while repayment of public debts is disproportionately high compared to budget revenues.
Some borrowings have not been properly computed, he said.
He urged the government to cut the deficit.
Bad debts not yet solved
The PM said economic development is stable and inflation, low. Inflation is expected to be below 5 percent and credit growth at 12-14 percent this year.
But consumer demand remains low, credit activities are sluggish, and bad debts are being tackled too slowly, he said.
The government has GDP growth, inflation, and export growth targets of 6.2 percent, 5 percent of 10 percent for next year, and would focus on stabilizing the exchange rate, boosting the stock market, and accelerating economic restructure, he said.
Assessing the government’s report, chairman of the NA Economic Commission, Nguyen Van Giau, said the government should focus more on helping the business sector overcome difficulties.
The number of firms closing down remained high, at an estimated 7,000-odd, in the first nine months of this year, he said. The unemployment rate admittedly fell, but mostly because workers moved to the unorganized sector with low and unstable salaries, he said.
Banks’ bad debts increased to 4.17 percent in July from 4.07 percent in May and 3.61 percent last year.
The Vietnam Asset Management Company (VAMC), which buys banks’ bad debts against a “special bond” redeemable for credit from the central bank, has been slow in dealing with bad debts, he said.
The VAMC has found it hard to find foreign investors who want to buy bad debts secured by property.
The company has bought VND56 trillion (US$2.67 billion) worth of bad debts since July 2013 when it was established by the central bank. It has targeted VND70-100 trillion worth of bad debts this year.