VietNamNet Bridge - Vietnam’s public debt is still within the safety line, but there are latent high risks.

According to The Economist, by October 11, Vietnam’s public debt had reached $92.6 billion, accounting for 46 percent of GDP. This represents an increase of $6.4 billion in the last three months and 9.6 percent increase compared with the same period last year. Every Vietnamese citizen bears $1.016 in debt.

The figures showed the public debt has increased by four times compared with 10 years ago, when the debt was $22.3 billion and the debt per head was $268.

However, Vietnam’s public debt is not considered too serious. The ratio of the debt on Vietnam’s GDP as published in The Economist is 46 percent, which is much lower than the figure released by the Ministry of Finance of Vietnam (MOF) in late September, at 59.6 percent.

A research institute under the Ministry of Planning and Investment (MPI) released a report saying that the ratio is 66.4 percent of GDP.

However, the report has been rejected by MOF, which said at a press conference on October 2 that MOF is the only agency in Vietnam which has the right and responsibility of releasing reports on public debts.

Meanwhile, Vietnamese economists think that Vietnam’s public debt is not too high, and even if it is lower than 65 percent of GDP, there are latent high risks.

Nguyen Chi Hai from the HCM City Economics & Law University, pointed out that the public debt has been increasing very rapidly in the last five years. Citing the General Statistics Office’s figures, Hai said the ratio of public debt on GDP has increased from 51.7 percent in 2010 to 60.3 percent in 2014.

The rapid increase in Vietnam’s public debt is partly attributed to the changes in the debt structure and the high demand for budget financing needs, which has increased more rapidly than the preferential capital mobilization. The government has been relying on domestic borrowing to satisfy capital mobilization. 

Regarding the debt payment, according to MOF, the expenses on public debt payment have increased from 22 percent of the state budget’s revenue in 2010 to 26 percent in 2014, while the expenses on loan interest accounts for 7.2 percent of the state budget’s expenditure. Meanwhile, the budget deficit has reached 5.3 percent in recent years.

According to Hai, the high risks not only lie in the rapid increase, the high amount or the high ratio of GDP, but also in debt solvency.

Vietnam is a developing economy with income per capita at low average level. Though Vietnam’s economic growth quality has improved, uncertainties still exist. The Incremental Capital Output Ratio (ICOR) which measures capital efficiency is 5.2 (in 2014).

Dat Viet