Vietnam’s Overseas Bond Issuance Isn’t A Good Idea, Says German Politician

Tuan Minh

12:24 06/11/2015

BizLIVE - Issuing large amounts of foreign currency-denominated abroad is not an ideal option for the Vietnamese government, said Juergen Koppelin, a former member of the German parliament.

Vietnam’s Overseas Bond Issuance Isn’t A Good Idea, Says German Politician

Mr. Juergen Koppelin speaks at the German parliament. (Photo: Internet)

A country sells overseas bonds with two prime goals: to roll over existing debts and to finance development projects. Vietnam will have to continue to sell debt in following years for rollovers if it opts for bond issuance.
If the Vietnamese government needs funding for investment, it should take out loans with affordable interest rates from other countries, Mr. Koppelin, who was in charge of the Budget Committee of the German parliament, told BizLIVE in an interview on Thursday.
“Why doesn’t Vietnam borrow from other countries which offer preferential rates, instead of opting for risky bond issuances? For example, the German government provides loans at a rate of around 1% only per year,” he suggested.
The Vietnamese government has forwarded a plan to sell up to $3 billion worth of sovereign bonds having terms of between 10 and 30 years to international investors starting 2017 to roll over domestic debt issued in the 2015-2016 period.
The bond issuances aim to set low reference interest rates, bringing down borrowing costs for the government, government-guaranteed and corporate loans. In addition, the issuances are expected to ease foreign currency strains for domestic banks, said Minister of Finance Dinh Tien Dung last month.
In November 2014, the government issued $1 billion worth of USD-denominated to international investors, with lower yields than those in the two previous sales in 2005 and 2010, to roll over bonds that come due in 2016 and 2020.
The government’s bond issuance plan has heated debate among lawmakers who have voiced concerns over the nation’s ballooning public debt, which is projected to reach 61.3% of GDP this year.