Illustrative image (Source: bizlive.vn)Hanoi (VNA) – Public investments that exceed the State budget’s payment capacity should not be implemented, Finance Minister Dinh Tien Dung said, referring to it as one of a string of measures to ensure public debt stays within safety limits.
The government’s investment should be narrowed to go into key economic sectors, while conditions for government bailouts must be tightened, he stressed.
Minister Dung admitted that public debt has been rising quickly in recent years but is still under control. He affirmed that his ministry has been working with other ministries and sectors to keep public debt within safety limits.
As of December 31, 2015, the country’s public debt made up 62.2 percent of its Gross Domestic Product (GDP) and its foreign debt was equal to 43.1 percent of GDP. Both numbers are still within safety limits set by the National Assembly, 65 and 50 percent, respectively.
Meanwhile, the Government’s debt reached 50.3 percent of GDP, which, however, surpassed the allowed 50 percent threshold by 0.3 percent, according to the Ministry of Finance.
Dung stressed the need to urgently restructure public debt towards increasing the proportion of long-term loans to reduce pressure on payment in the short-term. It should be coupled with stablising the macro-economy and ensuring national financial security as top priority.
For Dr. Nguyen Dinh Cung, Head of the Central Institute for Economic Management, the Government should build a public-debt management institution with improved forecast and analysis capacity and transparent operation.
Independent public debt audit will contribute to minimising State budget’s wastefulness, reducing unnecessary spending and public debt, Cung suggested.
Economic experts pointed out that managing public debt also requires monetary, exchange rate, structure and foreign trade measures.
At a conference on international experience on public debt management recently co-held by the Agency for Debt Management and External Finance and the International Monetary Fund (IMF), John Gardner, Head of the IMF expert delegation, said effective public debt management should be based on a wide range of criteria, such as the local/foreign currency structure, average payment time, the debt scale with payment time of less than one year.
According to the Agency for Debt Management and External Finance, the agency will work with relevant agencies to develop the domestic capital market to diversify bond terms and issue government bonds with terms of at least five years and expand the average terms of government bonds during 2016-2020 to six to eight years to mobilise capital.-VNA
