Public debt in 2021 will exceed 4 trillion VND | News

10/19/2020 World



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Each citizen carries 37 million dong of public debt

In the report on public debt 2020, the expected 2021 has just been sent by the Government to the National Assembly, a series of challenges have been pointed out for 2021 and the next period. The public debt in 2020 is expected to exceed 3.63 million million and the obligation to repay both the principal and the interest will be approximately 360,000 million. With a population of approximately 97.5 million people by 2020, each citizen has around 37 million dong of public debt.

In 2020, the external debt / export obligations ratio is 34.6%, almost 10% higher than the maximum limit of 25% allowed by the National Assembly. This is an indicator that the Government believes should be taken into account.

According to the budget estimates and budget allocation in 2021 presented to the National Assembly at this meeting, the Government is required to borrow around 579.772 billion VND to balance the central budget, which includes: Central budget spending is of approximately 318,870 billion Dong; loans to reimburse capital from the central budget are approximately 260.902 billion dong. Therefore, by 2021, public debt will exceed VND 4 trillion, with a growing debt service obligation.

In 2021, the direct repayment obligation of the Government is approximately 368.276 billion VND, mainly the domestic debt payment is approximately 323.093 billion VND, approximately 27.4% of budget revenue. This index exceeded the threshold allowed by the National Assembly with a period of 25% for the period 2016-2020, mainly because the national government bonds issued in the previous period matured at a high level in 2021, around 187,001 billion VND . it represents 13.9% of budget income.

Although it is forecast that by the end of 2021, the public debt will be revalued by around 46.1% of GDP (around 58.6% of GDP has not been revalued), without exceeding the ceiling, but debt payment obligations direct government versus budget revenue. it could increase to 27.4%, which the Government considers “necessary to have measures to control this indicator.

Liquidity risk and interest rate risk are higher

Regarding the risk assessment, the Government said that the liquidity risk for the budget in the next period will arise mainly from the internal debts of the Government due to the high maturity of the debt payment obligations in several years and number of periods of the year.

In the next period, loans from the IDA of the World Bank (WB, as of July 2021) and the ADF of the Asian Development Bank (ADB, as of 2023) will begin to apply fast repayment terms. Principal repayment period reduced by half compared to the original term of the loan. ODA lending will gradually decline to completion in the next 5 years, resulting in a shortage of long-term loans and high incentives for investment in development.

Besides the amount of government bonds expected to be issued is around 300,000 million (the issue is expected to be difficult); Disbursement of ODA loans, concessional loans from abroad is approximately 94.230 billion VND, the capital needed to mobilize from other domestic sources is expected to be approximately 227.357 billion VND, but the source has not been identified specific.

Interest rate risk is also assessed as a significant increase, due to the small size of the bond market, while the financial potential of non-bank financial institutions (except social security) is limited, so focus on issuing only Long-term long-term government bonds is quite difficult.

In the coming time, the shift to mobilization according to the market mechanism (due to the shortage of ODA loans, external concessional loans) will also significantly increase the risks and costs of mobilizing government loans. In assessing the challenges with public finances in the coming time, the government pointed to five issues, in particular, the direct debt repayment obligation of the government compared to total budget revenue tends to increase rapidly and risks exceeding the threshold for a few years in the next period. This problem, on the one hand, greatly reduces the space for recurrent investment expenses and budget development, on the other hand, it is potentially risky for national financial security and has a risk of negative impacts on national credit number.

The pressure to balance liquidity, allocating budget resources to pay past due debts (mainly government bonds) is not small in the absence of effective control of the need for loans to offset the budget balance. LETRA, or not actively implement proactive debt management operations (such as swap, repurchase of debt instruments before maturity …), especially in the context of space to increase budget revenue in the next period. towels



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