The State Bank of Vietnam (SBV) does not plan to adjust the dong/dollar exchange rate now because this would place a heavier burden of foreign debt on the government and businesses.

 

No official document has been released about the money Vietnam paid in 2014 for foreign debt or the amount needed to pay in 2015.

The government’s reports to the National Assembly on the allocation of foreign debts, public debt management, debt payment and the 2015 state budget estimates did not show the figures.

The reports said that Vietnam would have to pay VND150 trillion in 2015 for aid and debt, with no detailed figures about the payment for domestic debt and foreign debt and the ratio of the payment on the total state budget revenue.

The most updated figure is about foreign debt payment obligations in 2014. 

A government report in May 2014 showed that in 2013, the government had to pay $1.703 billion in foreign debt, or VND35.682 trillion, if considering the exchange rate at that moment. 

The report also showed that the obligatory domestic debt payment was VND147.658 trillion in the same year. 

The government’s domestic and foreign debt would be equal to 100 percent of the year’s budget estimates, which was within Vietnam’s safety line (below 25 percent of total state budget’s revenue).

Meanwhile, it is still unclear if it was safe or would be safe in 2014 and 2015. It is also unclear how high the foreign debts would be if the State Bank adjusts the dong/dollar exchange rate.

Nguyen Quoc Anh, a senior official of the Ministry of Planning and Investment, said at an inter-ministerial meeting held at the ministry’s head office last week that if Vietnam devalues the local currency by one percent, the foreign debt would increase by VND10 trillion.

However, the State Bank has not confirmed the information.

Though the State Bank said it would not adjust the exchange rate for now, worries still exist.

Analysts noted that foreign debts were still “worrying” even at a time when the exchange rate was very stable in 2014. 

Since the annual debt payment obligations have increased rapidly year after year, it has been difficult to balance revenues and payments.

They noted that once a government borrows foreign money or acts as a guarantor for business loans, a stable exchange rate within a certain period will not be a “lifebuoy” for debtors.

Vietcombank Securities Company (VCBS), in its latest report, predicted that the official dong/dollar exchange rate would not be adjusted in the first half of 2015.

The demand for the greenback has decreased after reaching a peak in late 2014. Meanwhile, the demand for Vietnam dong is increasing.

VCBS noted that the expected low inflation rate this year and the high possibility that the US Federal Reserve will not raise the prime interest rate soon in the first half of the year will help ease pressure on the dong.

TBKTSG