Good management of public debt creates room to implement expansionary fiscal policy


Long Thanh Airport Project. Illustrative Photo: Vietnam+
Long Thanh Airport Project. Illustrative Photo: Vietnam+

Bright spots in fiscal policy and macro policy management

In the context of the economy facing many external risks and challenges, including problems beyond forecasting that have had a negative impact and severe impact on the economy, the public debt safety indicators continue to be strictly controlled, within the debt ceiling approved by the National Assembly, contributing to building fiscal policy space.

The Ministry of Finance said that public debt safety indicators continue to be strictly controlled, within the debt ceiling approved by the National Assembly, and the effectiveness of public debt and government debt management continues to be maintained. By the end of 2023, outstanding public debt accounted for about 36.6% of GDP, outstanding Government debt 33.8% of GDP, and the Government’s direct debt repayment obligation about 18.8% of state budget revenue.

According to assessments, the results of public debt management are a bright spot in fiscal and macro poly management. Vietnam’s public debt is assessed by credit rating agencies and international organizations as sustainable and creates space to implement reasonable, expansionary fiscal policy when necessary, especially during severe outbreak of the Covid-19 pandemic.

“If in 2021, public debt is at 43.1% of GDP, by the beginning of 2024 public debt will fall to 37% of GDP, especially foreign debt will be 34% of GDP, while the debt target assigned by the National Assembly is 60% of GDP. This means that we still have great room to mobilize public loans to serve essential infrastructure projects and constructive infrastructure projects for future development. But those projects must promote the highest efficiency and contribute to the economic growth to the maximum extent. Our point of view is to only borrow when we can repay the debt and only borrow when we carry out the most effective works and projects to bring a breakthrough to the country’s economic development”, Minister of Finance Ho Duc Phoc emphasized.

In addition to strict control of debt safety indicators within the limits approved by the National Assembly, debt restructuring activities have also been actively implemented. Accordingly, outstanding domestic debt increased, accounting for about 71% of outstanding Government debt, contributing to minimizing exchange rate risks. Up to now, domestic debt is mainly long-tern Government bonds, minimizing the risk of refinancing.

The expected average term of Government bonds in 2023 is about 12.4-12.5 years, ensuring the loan term target of 9-11 years according to National Assembly Resolution No.23/2021/QH15 on the 5-year public debt repayment and borrowing plan for the 2021-2025. During the past year, interest rates for Government bond issuance were carefully managed, ensuring harmony with monetary policy management. Specifically, the average interest rate of the entire Government bond portfolio is expected to be about 3.3%/year in 2023, down 0.18 percentage points compared to 2022 in the context that global interest rates still maintain upward trend. Along with foreign debt gradually decreasing in the Government’s loan structure, the current foreign debt portfolio is still mainly long-term loans with preferential interest rates. This contributes to increasing debt sustainability in the face of exchange rate fluctuations in strong foreign currencies globally.

Vietnam’s credit rating is assessed positive

Credit rating organizations have all had positive assessments of Vietnam’s credit rating. This is all marked by the results of fiscal consolidation and public debt control. Along with the synchronous implementation of public debt management solutions, the Ministry of Finance has also actively accelerated communication to investors, effectively implemented national credit ratings, contributing to reducing Government loan mobilization costs according to the roadmap to improve national credit ratings until 2030.

According to Ms. Nguyen Xuan Thao, Deputy Director of the Department of Debt Management and External Finance (Ministry of Finance), all three credit rating organizations (Moody’s, S&P and Fitch) have positive comments on Vietnam’s macro economy, highly appreciate the efforts of the Vietnamese Government in operating activities, focusing on sustainable economic growth. Outstanding points of the economy recognized by rating organizations include: continuing to attract abundant FDI; effective import and export activities; public debt reduction. The fact that the national credit rating assessed positive is a bright spot, affirming the confidence of credit rating agencies in the recovery and growth prospects of Vietnam’s economy in the medium term, contributing to promoting the country’s image and continuing to attract international investors to Vietnam.

The upgrade of Vietnam’s credit rating is a bright spot to be recognized, demonstrating the international community’s appreciation for Vietnam’s efforts in credit rating as well as Government’s direction and management on macroeconomics, finance, public debt, banking, and currency. The credit rating upgrade will have a positive impact on the entire economy and contribute to facilitating Vietnam in mobilizing capital to promote economic development at appropriate costs and risks.


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