NA has approved the plan to raise the foreign ODA ceiling

Economists all agree that the lifting of the ceiling is necessary to obtain enough capital for development. 

However, risks are anticipated. Nguyen Van Ngai, vice rector of Hoa Sen University, commented that any new debt, foreign or domestic, would lead to an increase in the public debt which would be a burden on Vietnamese.

He pointed out that Vietnam will have to bear higher risks when borrowing money from foreign sources because of the possible exchange rate fluctuations. The capital cost Vietnam has to pay for foreign loans depends on Vietnam’s credit rating as well.

Therefore, Ngai believes that mobilizing domestic capital sources is the best solution for economic and infrastructure development.

Regarding the increase of the foreign debt ceiling by VND60 trillion, Ngai said that this is not a high figure. What he is concerned about is the trend of borrowing money from foreign sources. This shows problems in mobilizing domestic resources and also means that domestic economic activities are meeting difficulties.

Domestic resources can be sourced from two sectors – public and private savings. The former includes savings from the state’s spending. The source is limited because Vietnam needs huge capital to build infrastructure.

The lack of funds is also attributed to the waste and misspending in large projects and in regular expenses.

The private sector is also having difficulties. A report shows that by the end of 2017, Vietnam had 560,147 operating businesses, with the number of newly set up businesses increasing by 15 percent. 

However, 60,553 businesses, or 50 percent of newly set up businesses, had suspended operations.

There has been a steady increase in the number of unprofitable businesses since 2012, now accounting for 48 percent of total enterprises.

As the two sources cannot satisfy demand for capital, Vietnam has to seek foreign loans.

Le Cao Doan from the Vietnam Economics Institute said debt is not a danger, but Vietnam needs to earn money to pay debts.

Doan mentioned a report by the Ministry of Planning and Investment (MPI) which says that Vietnam should not abuse ODA capital and should strengthen the mobilization of domestic sources.

The Ministry of Finance (MOF) says the country’s foreign debt reached VND2,451 trillion by the end of 2017, or 49 percent of GDP.

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