VietNamNet Bridge – Vietnam is getting new loans to pay old debts, but the real dangers for Vietnam’s economy do not lie in how much Vietnam owes, according to Dr. Tran Dinh Thien, head of the Vietnam Economics Institute.

Thien said there are three major risks darkening Vietnam’s public debt situation that need to be considered seriously.

First, Vietnam’s public debt has been increasing rapidly. More seriously, the country is getting new loans to pay old debts. Loans should be used to expand production, while money for debt payments should come from profits from production expansion.

Second, regarding the structure of the debts, short-term loans make up a big proportion of the total debt. Government bonds are mostly short-term ones which mature within two to five years after the issuance dates.

“The total public debt of Vietnam is not too big, but the high proportion of short-term debt makes debt payment harder,” he said.

The third risk, according to Thien, lies in solvency. Citing statistics, Thien said the debt payment duties in 2014 have exceeded what is considered safe (25 percent of the total collection to state coffers).

“The figure could be 30 percent or even higher the next year, which is really alarming,” Thien said.

Dr. Tran Du Lich, member of the National Assembly’s Economics Committee, agreeing with Thien, emphasized that, if a public debt crisis occurs, it will depend on the rate of the total debts Vietnam has to pay every year on the sum of collected money in state coffers.

“The rate was 22.3 percent in 2013 and it will surely increase in the next few years. When it reaches 25 percent, it will be worrying. And Vietnam would be in danger if it climbs to 30 percent,” Lich commented.

Nguyen Sinh Hung, chair of the National Assembly, also has said that it is unsafe to borrow money to pay debts, and that the National Assembly would agree on the government’s proposal to lift the ceiling of expenditures in order to stimulate investments, not to pay debts.

The difficulties in capital mobilization and debt payment were admitted by the government in its report released in April.

Lich said the borrowing of money to pay debts has become more common. In 2014, the government has to pay VND208.883 trillion, but it can get VND118.750 trillion only from the state budget, which means that it needs to borrow VND90 trillion to pay debts.

The sum of money the government has to borrow to pay debts are believed to increase gradually in the next few years, which is the biggest worry.

Dr. Le Xuan Nghia, a renowned economist, has also warned that the debt payment obligation is predicted to exceed 30 percent by 2016.

TBKTVN