2024-2025, Vietnam plans to borrow about VND 1.25 million billion in the next two years. Of this, 750,000 billion dong must be borrowed to offset the central budget deficit, and about 465,800 billion dong is borrowed to pay the principal due to the central budget.

Vietnam is a country that always makes full and on-time debt payments, contributing to improving the national credit score. While many countries were downgraded, Vietnam was still upgraded by Moody's and S&P, and Fitch kept its credit rating unchanged.

The Vietnamese Government intends to borrow about VND 1.25 million billion in the next 2 years.

The Ministry of Finance is consulting ministries, sectors and localities on the draft report on the mid-term assessment of the 5-year public debt repayment and borrowing plan for the 2021-2025 period.

Notably, according to the draft of the Ministry of Finance, Vietnam intends to borrow about VND 1.2 million billion in the next two years.

Specifically, out of the total amount of 1.25 million billion VND needed to be borrowed in the two years 2024-2025, the Ministry of Finance said there are 750,000 billion VND borrowed to offset the central budget deficit while borrowing to pay the principal due to the central budget is about VND 465,800 billion.

The obligation to repay the domestic principal is VND 313,000 billion, and the foreign debt is VND 152,800 billion. According to the Ministry of Finance, the demand for loans to provincial People's Committees, public non-business units and businesses from ODA loans and foreign preferential loans will be about VND 33,400 billion.

The Ministry of Finance emphasized that the annual debt safety norms for 2021-2023 are guaranteed within the ceilings and safety thresholds approved by the National Assembly.

In the coming period, the Government of Vietnam will prioritize mobilization from issuing Government bonds (Government bonds) and make the most of the remaining ODA loans. Vietnam also utilizes reasonable mobilization of preferential loans and other capital mobilization channels.

In 2024-2025, the Government is expected to partially repay the debt, depending on the state of budget collection and the ability to allocate annual state budget sources to repay the debt.

Also read: https://vietreader.com/business/finance/82613-prime-minister-urged-to-expedite-2-vat-reduction-plan.html

Vietnam's public debt

Previously, information from the Ministry of Finance said that up to now, the total loan amount of the Government reached about 44.6% of the plan, of which loans from the central budget reached 45.9%.

The Government's direct debt repayment obligation reached 54.4% of the plan, and the average issuance term of government bonds was from 13.92 to 12.6 years, ensuring the set target.

According to the Department of Debt Management and External Finance, the Ministry of Finance, implementing Resolution No. 23/2021/QH15 of the National Assembly on the National Financial Plan and the 5-year borrowing and repayment of public debt for the period 2021-2025 to present, specific goals and quantitative targets set by the National Assembly, Vietnam has achieved.

The total loan amount of the Government is about 1,370 million billion VND; the Government's direct debt repayment obligation is about 937,000 billion VND (reaching 54.4% of the plan); withdrawing capital from government loans for on-lending is about VND 57,500 trillion, ensuring the limit does not exceed VND 222,000 billion.

Additionally, the average issuance term of government bonds in 2021 reached 13.92 years; in 2022 reached 12.67 years; The year 2023 is expected to take 12.6 years, ensuring the target of 9-11 years.

It is estimated that by the end of 2023, public debt / GDP will be about 40-41%, and Government debt / GDP will be about 37-38%, still ensuring safety.

The country's external debt/GDP is about 40-41%, and the Government's direct debt repayment obligation (excluding the debt repayment obligation for on-lending) of the total state budget revenue is about 20-21. %.

The country's foreign debt repayment obligation (excluding short-term principal repayment obligations under 12 months) of the total export turnover of goods and services is about 8-9%.

For domestic loans of the Government, the Ministry of Finance said it is expected to mobilize about 1.13 million billion dong, mainly from domestic government bond issuance sources, state budget loans and other loans according to regulations of the law.

It is expected that the total direct debt repayment obligation of the Government in the second half of the period (2024-2025) will be about VND 715,000 billion, the principal payment obligation will be about VND 465,800 billion, and the interest payment obligation is about VND 249,200 billion.

Domestic debt repayment is VND 313,000 billion, 67.2%; foreign debt repayment is 152,800 billion dong, 32.8% of total principal repayment.

Particularly for loans from the State budget, the outstanding balance as of June 2023 is VND 233,710 billion, which is the outstanding loan from previous years.

Also read: https://vietreader.com/news/83493-state-budget-revenue-drops-in-jan-april.html

Vietnam has a good reputation for borrowing and paying debts.

Previously, on August 17, 2023, in Hanoi, the Department of Debt Management and External Finance (Ministry of Finance) coordinated with the World Bank (WB) and the Swiss Federal Economic Department to organize a meeting to Draft a consultation and assessment mid-term plan for borrowing and paying public debt for 5 years, period 2021 - 2025.

Speaking here, Mr. Truong Hung Long, Director of the Department of Debt Management and External Finance, Ministry of Finance, said that Vietnam's 5-year plan to borrow and repay public debt in the 2021-2025 period had been implemented in the context of the world and the region have many complicated and unpredictable changes for such factors as the COVID-19 epidemic, the Russia-Ukraine conflict and China's "Zero COVID" policy.

However, according to the Director of the Debt Management Department, Vietnam still faces many challenges due to the high openness of the economy, so it is easily affected by external shocks. Impacts of climate change, natural disasters, epidemics, and environmental pollution put pressure on the budget and finance.

According to Mr. Truong Hung Long, looking back at the past 2021-2023, public debt management has achieved some outstanding results; public debt safety is ensured within the ceiling and warning threshold set by the National Assembly. 

In particular, to ensure the mobilization of loans for the state budget and development investment, Vietnam has made full and timely debt repayments and repayments, contributing to improving the national credit score.

Sharing at the conference, Mr. Andrea Coppola, Chief Economist, World Bank in Vietnam, highly appreciated that Vietnam has made important reforms in public debt management, including strengthening the legal framework and institutional management.

The WB representative noted that when Vietnam becomes a middle-income country and then a high-income country, it will have to invest more. To do this, however, requires massive growth.

Mr. Coppola commented that this is not easy when climate change creates many challenges for Vietnam. In such a context, the need for debt management must change and create new needs.

Along with that, the role of the Social Insurance Fund as a large source of mobilization gradually decreased, which means that the cost of debt mobilization increased because the deposits followed market interest rates. Bonds currently held by social insurance funds will have to be mobilized at market interest rates. Later on, the fund will no longer be a major source.

Vietnam needs to overcome barriers and obstacles and create favorable conditions to speed up the implementation and disbursement and improve the efficiency of public investment projects.

In the coming time, the Ministry of Finance also proposes to study and put Vietnamese government bonds into the basket of international bond indexes to attract more investment funds and foreign professional investors.