The Government plans to borrow over VND1.7 quadrillion ($73.2 billion) in 2021-2023 to meet the capital demand for socio-economic development, according to the public debt management plan for the next three years approved last week.

The banking sector is still worth an investment in 2021 on expectations the Vietnamese economy and business community will recover as the pandemic is under control, experts have said.

Capital has become very cheap with the Vietnam dong interest rates in the interbank market having fallen to a four-year record low, according to the Vietnam Interbank Market Research Association.

The size of the local Government bond (G-bond) market by the end of last month was equal to 25.1% of the country’s gross domestic product in 2019, marking a 12-fold increase over 2009.

The Government has proposed borrowing VND459.5 trillion (US$19.9 billion) next year to make up for the State budget deficit, increasing regular expenditures and social insurance debts.

Commercial banks are rushing to issue bonds to balance short-term and long-term capital, and ensure their capital adequacy ratio.

Since issuing corporate bonds has become easy thanks to open regulations, it is necessary to tighten control over bond issuance.

The State Bank of Vietnam (SBV) will hold its benchmark refinancing and discount rates at 6.25% and 4.25%, respectively, in addition to maintaining its 14% credit growth target for the remainder of 2019, experts forecast.

The State Treasury reports that it has fulfilled 84 percent of the year’s capital mobilization plan, but only 8.5 percent of the disbursement plan has been implemented. 

Prime Minister Nguyen Xuan Phuc has approved a plan to develop Vietnam’s bond market in 2017-20 with a vision to 2030.

VietNamNet Bridge – Capital mobilization through Government bond sales beat the target by 11% and set a record in terms of volume last year. 

VietNamNet Bridge - Issuing corporate bonds was not the typical method used by banks to mobilize capital in the past, but that has changed. 

The announcement by the Ministry of Finance (MOF) to seek capital in foreign currencies from domestic sources has raised concerns. Experts warned this would encourage people and businesses to hoard foreign currencies and worsen dollarization.

The government has begun implementing the plan on mobilizing capital in large quantity after getting the go-ahead from the National Assembly as the state budget is becoming exhausted.

The Ministry of Finance (MOF) last week submitted to the National Assembly’s Standing Committee a plan to issue government bonds to call for capital in the international market for domestic debt swap, though current laws do not allow this.

The Ministry of Finance (MOF), which is drafting a decree on public debt management, plans to remove the policy on giving government guarantees for loans from financial institutions.

Vietnam has been doing well in mobilizing capital through bond issuance, but has not been using the capital in the most effective way.

VietNamNet Bridge – By assigning the government to focus on issuing long-term bonds, the National Assembly has shown that it believes the monetary market will be stable in 2015.

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