State Bank of Vietnam headquarters. Source: Thanhniennews
“This [the increase in CDS] somehow reflects concerns of foreign investors about Vietnam’s public debt
”, the National Financial Supervisory Commission, the Vietnamese government’s financial supervisor said in a report sent to a regular cabinet meeting.
Foreign traders net sold a total of 4.6 trillion VND (204.5 million USD) during August, NFSC added.
The commission noted the government’s bond issuance plan is challenging. The successful bidding ratio of G-bonds in September was as low as 20.7%. The State Treasury has raised a combined 156.48 trillion VND from G-bond sales in the year to date, meeting 63% of the year’s plan.
The Vietnamese government has repeatedly stated that the country’s public debt remains safe , staying at nearly 60% of gross domestic product (GDP) at the end of 2014. The Ministry of Planning and Investment has recently said the public debt-GDP ratio hit 66.4% last year and proposed raising the public ceiling to 68% of GDP instead of 65% currently.
Public debt management will continue to be a thorny issue for the government next year because budget collections from import-export activities are seen to fall as Vietnam realizes its commitments under free-trade agreements and crude oil prices are predicted not to recover strongly.