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Vietnam’s foreign debt nears ceiling: gov’t report

Monday, October 29, 2018, 16:00 GMT+7
Vietnam’s foreign debt nears ceiling: gov’t report
Workers operate an assembly line at a factory in Vietnam. Photo: Tuoi Tre

Vietnam’s public debt and government debt in 2018 are projected to stand at 61.4 percent and 51.8 percent of its gross domestic product (GDP), respectively, while foreign debt will be equivalent to 49.7 percent of the country’s GDP, according to the latest government report.

A country’s foreign debt is the total debt that country owes to foreign creditors, which can come from government loans, government-backed corporate loans, or independent corporate loans.

Vietnam’s lawmaking National Assembly sets a ceiling for the country’s foreign debt at 50 percent of GDP, meaning the projected foreign debt-to-GDP ratio of 49.7 percent still falls within limits.

However, the legislature’s Finance and Budget Committee has expressed concerns over growing foreign debt in recent years, adding the ratio is just about to reach the ceiling.

In its report submitted to lawmakers, the government pointed out that the majority of Vietnam’s foreign debt is made up of independent corporate loans, which the government is not responsible for paying.

As of the end of 2017, Vietnam’s foreign debt topped VND2.45 quadrillion (US$105.51 billion), according to Vo Huu Hien, head of the debt management department under the Ministry of Finance, told Tuoi Tre (Youth) newspaper.

The figure was already equal to 49 percent of GDP, or a thin one percentage point margin from the ceiling.

Workers operate an assembly line at a factory in Vietnam. Photo: Tuoi Tre
Workers operate an assembly line at a factory in Vietnam. Photo: Tuoi Tre

Hoang Quang Ham, member of the National Assembly’s Finance and Budget Committee, said Vietnam’s foreign debt has been raised to near its ceiling due largely to loans taken by foreign-invested companies.

For instance, credit taken out by Thai Beverage Co. Ltd. and its affiliates to fund the acquisition of a stake worth $4.8 billion in local brewer Saigon Beer Alcohol Beverage (Sabeco) led Vietnam’s foreign debt to rise sharply in 2017, Ham said.

“If Vietnam’s foreign debt passes 50 percent of its GDP, the country’s credit rating will be negatively affected,” he said.

“If that happens, Vietnamese companies will face challenges in accessing foreign loans, as the interest rates will be higher,” Ham added.

Vietnam’s Prime Minister Nguyen Xuan Phuc has recently approved a proposal by the finance ministry that caps how much a corporation or credit institution can borrow from foreign creditors in order to monitor this activity more closely and ensure the country’s financial security.

The loan limit is currently set at $5 billion.

Companies are also barred from having outstanding short-term foreign debts in 2018 that exceed its own outstanding debts in 2017.

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Tuan Son / Tuoi Tre News

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