Vietnam Govt Plans to Reach out to Overseas Bond Issuances

Minh Tam

10:11 13/10/2015

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The Vietnamese government plans to issue more sovereign bonds abroad amid sluggish debt sales at home.

Vietnam Govt Plans to Reach out to Overseas Bond Issuances

The Vietnamese government plans to issue more sovereign bonds abroad amid sluggish debt sales at home. (Photo: Internet)

The government on October 12 asked for the National Assembly (NA)’s permission for a plan to sell $3 billion worth of sovereign bonds having terms of between 10 and 30 years abroad starting 2017 to roll over domestic debt issued in the 2015-2016 period.

The Ministry of Finance raised 127.5 trillion Vietnamese dong ($5.7 billion) from G-bond sales in the nine months through September, meeting 51% of the year’s plan. The amount includes 64 trillion in five-year notes, 63.4 trillion dong in 10-year and 15-year bonds and 4.23 trillion in 20-year bonds.

The government, meanwhile, was due to settle 160.7 trillion worth of debt in the nine-month period, meaning it fell short of over 33.2 trillion dong.

As much as 363.17 trillion worth of G-bonds is due in the 2015-2016 period, while sources of funding are limited, Finance Minister Dinh Tien Dung said at a meeting of the NA’s Standing Committee.

The overseas bond issuances with diverse tenors would not increase government debt and the nation’s public debt will remain below the permitted limit throughout 2020.

“With those overseas bond issuances, the government’s foreign debt will not exceed 50% of total government debt in accordance with the national public debt strategy in the 2010-2020 period with vision to 2030,” Minister Dung affirmed.

The future international bond issuances are aimed at setting 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, Mr. Dung explained.

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.

Facing difficulties in budget collections due to dwindling revenues from crude oil, the Ministry of Finance has taken out a 30-trillion-dong loan from the State Bank of Vietnam. It also plans to issue another $1 billion in foreign currency-denominated bonds to state-controlled Vietcombank.

The ministry has also asked for a green light to issue less-than-five-year bonds to stimulate banks’ demand for government debt.

Phung Quoc Hien, head of the NA’s Finance and Budget Committee, said in a report that Vietnam’s public debt is projected at 61.3% of gross domestic product (GDP) at the end of this year and reach 63.2% of GDP in 2016, below the ceiling of 65% of GDP.

MINH TAM

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