VietNamNet Bridge – National Assembly (NA) deputies are concerned about soaring public debts. Truong Van Phuoc, deputy chairman of the National Financial Supervisory Commission, discusses the matter. Excerpts:

The nation’s public debts are getting near the safe threshold of 65% of gross domestic product (GDP). What do you think?

I think public debts are being exaggerated. Laws allow for a public debt limit of 65% of GDP. For example, in a family, parents allow their children to spend VND100,000 a day but they use it up at noon. If the parents criticize their children for this, it is unfair.

Truong Van Phuoc

In a nation’s financial sector, we all know that public debts go through the public investment channel. This channel along with private investment, consumption, government spending, net exports and imports contributes to economic growth. The nation’s GDP has kept expanding and is expected at US$208-210 billion next year compared to over US$180 billion this year.

I don’t think public debts are a matter of great concern. We should not release exaggerating figures. I think it is necessary to warn of public debts but we should not exaggerate the matter.

But the spending structure has turned seemingly problematic with 72% of the State budget for routine spending, 26% for debt payment and a fraction for development investments. Do you see risks?

What is a real problem? The structure has existed for a long time. NA deputies have somehow spent several decades building the structure. No one dares to ask why we do not use the entire State budget for development investments.

We must increase wages, generate more jobs and there are still millions of war veterans. The issue must be considered in a specific political and social context.

Therefore, our money is spent under certain historical circumstances with many war invalids and families contributing to the country’s independence. No one dares to cut such routine spending. NA chairman Nguyen Sinh Hung said we must pay for these beneficiaries though we do not have money.

All matters related to development investments and routine spending have been considered at many NA sessions and by prime ministers and finance ministers, not on November 3, on November 2, this year or last year. Nonetheless, after all, it’s not big or small debt but what matters most is how our loans are used effectively. If all public investments had brought about good results, our economy should have been at a higher stage of development. However, we have not reaped as good results as expected and this forces us to do the restructuring.

Short-term debts have also surged, leading the Government to issue bonds to settle debts. What is your comment?

Our borrowing structure is still good as 40-50% of loans are from domestic lenders. Low interest rates in Vietnam and other parts of the world is a good chance for us to restructure debts and interest rates, especially for domestic debts.

I think that this is a technical matter that administering agencies are executing. They make use of low rates to restructure domestic debts and the nation’s cash flow. I think public debts are not a big problem and insolvency is impossible.

Government bond sales have amounted to nearly VND190 trillion in the year to date, taking away financial resources from the private sector. What do you think?

I think it’s wrong. The relationship between public and private investments, government bonds and bank credits is like communicating vessels. G-bond is not bad in itself. This is an effective investment channel for banks at a time when they cannot lend to the private sector. Therefore, there is a sound reason for the State to borrow money from banks.

SGT /VNN