Vietnam’s foreign debt estimated at $29 billion

Vietnam borrowed an additional $1 billion in 2010, raising its total foreign debt to $29 billion, according to the Ministry of Finance.

It was equivalent to around 28 percent of Vietnam’s GDP of $104 billion last year. Of the amount government debt accounted for $25 billion and loans for state-run companies and organizations accounted for the rest.

While the Finance Ministry confirmed that the ratio is safe, experts said the country should be very careful.

Nguyen Thanh Do, chief of the Department of Debt Management and External Finance under the Finance Ministry said that it is an appropriate level considering the country’s development strategies and within eminently manageable. Vietnam’s debt repayment has been punctual since 1993, he added.

According to the Department of Debt Management and External Finance, in the first quarter of 2010, Vietnam paid over $329 million in foreign debts. Government-guaranteed businesses and organizations also paid over $127 million in debts in the same period.

With the current debt, Vietnam will have to pay over $1.7 billion in debt and over $250 million in interest in 2016, the highest year.

In 2011, the country will have to pay around $1.1 billion of debt (both capital and interest). By 2025, Vietnam will have to pay $855 million of debt.

Since many state conglomerates are planning to issue intentional bonds, putting more pressure on the debt situation, Nguyen Thanh Do said the ministry will keep a close eye on the bond issues.

Doan Hong Quang, a senior economist from the World Bank in Vietnam, said that as a developing nation, Vietnam should pay attention to its repayment capacity and the currencies the loans are denominated in when borrowing.

Japan is now one of the biggest creditors of Vietnam so Vietnam should be very careful as the yen appreciates. Since the US dollar is also appreciating against the dong, the need to buy dollars to buy yen for debt servicing could cause a double burden, he warned.

The International Development Association, a World Bank fund, and Japan are the biggest creditors with debt worth $6.1 billion and $8.4 billion respectively.

Other big creditors include the Asian Development Bank ($3.8 billion), private lenders ($2.4 billion), France ($1 billion), Russia ($579 million) and China ($448 million).

The total government’s debt and the debts guaranteed by the government

Tags: Vietnam foreign debt