HANOI, March 14 - Bad debts in Vietnam's banking sector declined to 2.9 percent of loans at the end of 2015, from 3.7 percent a year earlier, the government's National Financial Supervisory Commission said on Monday.

The bad debts were valued at 119.66 trillion dong ($5.4 billion), the commission said in its annual financial report.

Loans grew 19.3 percent last year, accelerating from 14.3 percent in 2014, the report said. The central bank earlier estimated 2015 credit growth at 18 percent.

Inflation, bad debt, credit growth and currency stability have been the focus of the State Bank of Vietnam's policymaking after prices soared 23 percent in 2008 and bad debt spiralled out of control, causing a real estate crisis and a wave of bankruptcies.

The economy is now back on track, outpacing much of Asia in 2015 with growth of 6.68 percent, the fastest in five years, helped by an expanding industrial sector and record foreign direct investment.

The government has a 2016 economic growth target of 6.7-7.0 percent. The central bank hopes banks will increase lending 18-20 percent this year.

The commission's report said 2016 economic growth was boosted by the signing and implementation of a number of free trade agreements.

For this year, Vietnam's economy could expand 6.7-6.8 percent while inflation should be kept to 3.0-3.5 percent, said the commission, which advises the government on policies to develop the country's banking, stock and insurance markets. ($1=22,296 dong)