Vietnam\'s sovereign debt rose to USD32.5 billion in 2010, an increase of 16.7 percent from the end of 2009, according to a bulletin released by the Ministry of Finance last week.
The total was equivalent to about 42.2 percent of the country\'s gross national product (GDP) of USD104 billion.
Government debt accounted for about USD27.9 billion of the total, with local governments and State-owned companies accounting for the remaining USD4.6 billion.
Sovereign borrowing costs were low, with USD23.4 billion worth of the debt carried at low fixed interest rates of 1-5.99 percent per year.
However, the volume of new debt with an interest rate ranging from 6-10 per cent yearly was doubled to USD1.89 billion last year from USD919.04 million in 2009.
"If Vietnam, or any developing country, can maintain 5-5.5 percent economic growth, the country definitely has the capacity of paying sovereign debt of USD2 billion per year," said economist Vu Thanh Tu Anh, director of research for the Fulbright programme in HCM City.
The ratio of foreign reserves against total short-term debt also plunged dramatically to 187 percent in 2010, compared with 290 percent in 2009; 2,808 percent in 2008; and 10,177 percent in 2007.
The new borrowing cost "is an obvious consequence of Vietnam joining the ranks of middle-income nations," said Anh.
Vietnam\'s leading creditors in 2010 were the governments of Japan, France, Russia and Germany, the International Development Association, the Asian Development Bank, and the International Monetary Fund. Bondholders held USD2 billion in 2010, up from over USD1 billion a year earlier.
Last year, Vietnam repaid USD1.67 billion to its creditors, up 30 percent against the previous year. The country was expected to repay USD1.3 billion in principal and interest this year.
The Ministry of Finance bulletin set forth a repayment plan through 2026. Even if the country takes out no further foreign loans, Vietnam\'s debt payments will total nearly $8.4 billion in principal, fees and interest during 2012-16, a potential challenge for the Government.
The nation has been punctual in its debt payments since 1993, the ministry noted.
