(VOVworld) – Strict management, improving capital usage, and ensuring public debts within safe limits are measures to keep national financial safety and stabilize the macro economy. The government will take drastic actions to obtain these targets as Vietnam’s public debt has been increasing.

In Vietnam more than 98% of loans have been channelled directly to infrastructure projects, the rest for development investment (1.5%) and non-business expenditures for ODA projects (0.4%).

Public investment for economic development and infrastructure construction

Due to the impacts of the global financial crisis and economic recession and internal weaknesses, Vietnam’s economic growth has slowed from an average rate of 7% in the 2006-2010 period to 5.8% in the 2011- 2015 period.

The National Assembly has decided to reduce budget collection, support enterprises, and increase spending on social welfare. So budget allocation for development investment declined sharply from 25% of budget spending from 2006 to 2010 to 18% from 2011 to 2015. In order to meet its socio-economic development targets, Vietnam has had to seek domestic and foreign loans. Nguyen Thi Nghia, a National Assembly deputy from Hai Phong, said: “Public debt is a problem of several countries including developed ones in the industrialization and modernization process. We have to increase foreign borrowings and issue bonds to increase capital for infrastructure development such as building ports, roads, and hospitals. Several big projects using loans have been implemented, contributing significantly to Vietnam’s development.”

Vietnam’s budget overspending and bond issuance have led to a sharp increase in public debt from 51.7% of GDP in 2010 to about 60.3% of GDP at the end of 2014, which will likely be 64% in 2015. Other reasons include ineffective management, corruption, and wastefulness in construction investment and a low ratio of budget collection to GDP. Economist Le Dang Doanh said: "Vietnam has to work harder to reduce public debt. The most important solution is to make real progress in implementing the Prime Minister’s reform initiatives. It’s important to practice thrift in the whole economy to reduce the budget deficit and curb increasing public debt."

The Vietnamese government aims to keep public debt within a safe level

Vietnam will have to continue using domestic and foreign borrowings for development and socio-economic infrastructure. During the process, Vietnam will insist on 3 targets: keeping public debt within the limit allowed by the National Assembly of less than 65% of GDP, effective investment, and balancing the state budget for debt payment. It’s necessary to promptly restructure public debt in the direction of increasing the ratio of long-term loans with low interest rates. Prime Minister Nguyen Tan Dung said: "Public debt is used only for development investment and building important socio-economic constructions as planned. We have to carefully review and approve the list of government-invested projects, monitor the use of ODA, ensure project efficiency and construction quality, and prevent and handle corruption, wastefulness, and other negative phenomena."

The Government will continue to direct ministries, agencies and localities to closely monitor public debt, especially new loans and debts in capital construction and social insurance. Finance Minister Dinh Tien Dung said: "Vietnam will continue to develop the financial and bond markets and restructure public debt. We have to increase mid-term and long-term borrowings and minimize short-term loans at high interest. It’s important to closely monitor loans guaranteed by the Government and loans of the local authorities, and capital construction loans of ministries, and central and local agencies."

The Vietnamese government will review and integrate social security policies and national target programs to conform to policies for the 2016-2020 period.