Public debts to rise, Vietnam to lose its ability to pay off debts

Vietnam is losing the ability to pay off debts as three ratios: public debts/GDP, public debts/total government revenues and foreign debts/total export turnover of the country are worryingly high.

Vietnam is losing the ability to pay off debts as three ratios: public debts/GDP, public debts/total government revenues and foreign debts/total export turnover of the country are worryingly high, the National Financial Supervisory Commission (NFSC) analyzed.

Vietnam’s total state debts accounted for 56.6% of GDP (or VND1.103 trillion) in 2010, in which foreign debts and foreign public debts were 42.2% and 30.5% of GDP, respectively, the Ministry of Finance (MOF) data showed.

However, the NFSC estimated the country’s public debts much higher, at 75-80% of GDP as the agency included loans of businesses guaranteed by the government into calculations.

The ability to pay debts of the government is reduced, the NFSC added, pressing that Vietnam’s foreign exchange reserves/total short-term outstanding debts were declining fast, from 100 in 2007 down to 28, 3 and 2 in 2008, 2009 and 2010, respectively.

The NFSC also worries about the government’s long-term debts as they may become short-term ones when lenders encounter liquidity problems.

The country’s public debts are estimated at 70.8% of GDP in 2020, 75.5% in 2025 and 78.1% in 2030, assuming that average GDP annual growth rate in 2011-2020 achieves 7% and government budget deficit stays at 5.6% of GDP p.a.

Vietnam will have to pay foreign debt and interest of nearly $1.5 billion a year on average from now to 2015. Vietnam’s sovereign liabilities will peak in 2020, to hover at about $2.4 billion when the government’s $1 billion worth of overseas bonds issued in 2010 matures.

Source Sophie/ News Writer/ StoxPlus

Tags: Vietnam public debts