Vietnam’s public debt will reach a peak of 64% of gross domestic product (GDP) in 2017 before being slashed to as low as 58% in 2020, said Finance Minister Dinh Tien Dung at the National Assembly’s Q&A session on Tuesday morning.
The minister affirmed that the nation’s public debt per GDP will rise from 59.6% last year to 61.3% this year, still below the permitted cap of 65%.
He admitted that colossal regular budget expenditures have prevailed spending on development and debt repayments. Regular budget spending is estimated to make up 67%-68% of total state budget expenditures in 2014 and 2015, and this ratio will be lowered to 64% in 2016.
In Vietnam, regular budget expenditures are aimed to maintain the running of the administrative apparatus, pay salaries for state employees and finance security and national defense works.
“Under the Ministry of Finance’s medium-term plan, the ratio of regular spending over total budget expenditures will be brought down to 58%-59% by 2020,” Mr. Dung said.
The ministry has restructured national debts by increasing the ratio of domestic borrowings to 57.1% currently from 39% in 2011, he added.
The minister said that although the National Assembly, the country’s supreme legislative body, has turned a green light to a $3-billion international bond issuance plan, now is not the right time to materialize the plan as interest rates remain high.
Public debt has heated debate in Vietnam when the Ministry of Planning and Investment said the nation’s public debt should be 66.4% of GDP at the end of 2014, above 59.9% initially reported if the provision for contingent liabilities were taken into account. Debts of state-owned enterprises, the State Bank of Vietnam and insurance and social security institutions are not calculated.
Vietnam’s public debt inflated at a rate of 18.6% per year to 2,347 trillion dong (roughly $110 billion) in 2014, more than doubling that recorded in 2010, according to data of the Ministry of Finance and the World Bank.