Even though Vietnam\'s public debt is expected to equal 58% of the GDP by next year, Vuong Dinh Hue, Finance Minister said, "this is nothing to worry about."
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| Finance Minister Vuong Dinh Hue (Photo by Vneconomy) |
At a National Assembly (NA)’s socio-economic discussion on October 28, a number of NA deputies raised concerns about Vietnam’s rising public debt, which is forecast to make up 54.6% of the country’s GDP by the end of this year, and, if it continues to increase at the same pace, will reach 58% by the end of 2012.
Deputy Tran Du Lich from Ho Chi Minh City said, “Theoretically the country\'s debt could go as high as 60% or 65% without causing financial harm, but in reality that is not always the case. The matter is not as simple as a percentage; other factors must be taken into account, such as the ability to pay back the debt."
Deputy Tran Hoang Ngan, also from Ho Chi Minh City, said that some years ago, many European countries also said that their debts were at maintainable levels, but then slipped into insolvency. He said that he worried about this in the case of Vietnam.
Finance Minister Vuong Dinh Hue said, the public debt rate figure of 58% was based on assumptions of Vietnam’s growth, projected to be 6% next year. If the economy achieves a higher growth rate, then the debt to GDP ratio would obviously be lower.
According to Hue, official development assistance (ODA) makes up over 75% of Vietnam’s debt, 19% are other preferential loans. These loans often have repayment terms of decades, with interest rates ranging from 0.75 to 2% a year, meanwhile. Only 7% are commercial loans, he said.
He added that foreign debt accounts for 58% of the total, while domestic debt makes up 42%. The trend, he said, that domestic debt is rising in comparison.
According to him, this is a good sign, showing less dependence on foreign countries. Hue said that the government sets aside about 14-16% of total state budget to repay loans each year. In 2012, this amount will equal VND100 trillion (USD4.78 billion).
"While rising public debt is never a good thing, it is nothing to be worried about at this point," said Hue.
