Hue was speaking at a meeting with the leaders of some ministries and central agencies to assess the country’s foreign debts between 2011 and 2018, and the issuance of corporate bonds in the first half of this year, reported the Government news website.

The Ministry of Finance reported that Vietnam’s foreign debts increased an average of 16.7% annually in the 2011-2017 period.

Yet, foreign debts fell to 46% of the country’s gross domestic product (GDP) by late 2018, from 48.9% one year earlier.

Of the sum, the Government’s foreign debts, Government-guaranteed debts and debts owed by businesses in the nation were 19.3%, 4.4% and 22.3%, respectively.

The ratio of debt repayment to the total import and export turnover was about 25%, meeting international regulations and practices.

Having taken these results into account, Deputy PM Hue stated that the Government’s foreign debts, which have rapidly declined, are still below the ceiling rate of 50% set by the National Assembly (NA) and under the Government’s control.

In 2018, the Government set a loan guarantee limit of US$700 million, but did not guarantee the borrowing of international loans for projects, Hue said, adding that the Government gave priority to domestic loans, thanks to their lower interest rates.

He noted that up to 48.4% of the country’s foreign debts in 2018 came from the loans of businesses, as well as financial and credit institutions without government guarantees, compared with 25.6% in 2011 and 40.4% in 2016.

The rapid increase of these debts was largely from the FDI sector, especially large-scale enterprises.

“The hike in the nation’s foreign debts helped meet capital needs and mobilize resources for its socio-economic development and growth, but also affected its capacity to pay foreign debts,” he said.

The leader asked ministries and agencies to strengthen the management of foreign debts, in line with regulations, including the Law on Public Debt Management, and resolutions of the NA and Government on public debts, to ensure the capital demand of the economy, in general, as well as the rights and obligations of enterprises.

“The targets about the public debt ceiling, the nation’s foreign debts, and debt repayment obligations, compared with total import and export turnover of goods and services, are important indicators which must be aligned with the NA’s requirements,” he said.

He also assigned the Ministry of Finance and the State Bank of Vietnam to coordinate with the concerned ministries and agencies to fine-tune regulations on management of corporate debt not guaranteed by government, and focus on supervising the total debts and debt structure, as well as assess risks for each business, in accordance with international practices.

The Ministry of Planning and Investment was tasked to review and evaluate overall foreign investment, especially large-scale projects, and the impacts of foreign loan conditions on FDI growth and attraction.

Banks lead issuance of corporate bonds

Data from the Ministry of Finance shows that the total corporate bond sales exceeded VND116 trillion (US$4.9 billion) in the first half of 2019, up 7.4% from one year ago.

Of which, VND36.7 trillion was issued by commercial banks, accounting for 36% of the total, and real estate developers issued VND22.1 trillion, or 19%. The remainders were issued by securities firms (3.5%), and other businesses.

As of late June, the capitalization of the corporate bond market was equal to 10.2% of the GDP, surpassing the set target of 7% in 2020.

Deputy PM Hue said the corporate bond market has seen strong recent growth, since businesses are in need of major capital to finance their production and business operations, whereas credit growth tends to be managed more closely, particularly in high-risk sectors, such as real estate.

He added that the corporate bond market is poised to become a channel of short- and long-term loans for the business community. It will reduce the lending pressure among commercial banks and help these banks mobilize bond capital to increase their tier-2 or supplementary capital.

Corporate bonds have long tenures, such as five-year debts making up 66% of the total issuance. Investors are mainly organizations, with individuals representing some 6.1%, he said.

Hue was speaking at a meeting with the leaders of some ministries and central agencies to assess the country’s foreign debts between 2011 and 2018, and the issuance of corporate bonds in the first half of this year, reported the Government news website.

The Ministry of Finance reported that Vietnam’s foreign debts increased an average of 16.7% annually in the 2011-2017 period.

Yet, foreign debts fell to 46% of the country’s gross domestic product (GDP) by late 2018, from 48.9% one year earlier.

Of the sum, the Government’s foreign debts, Government-guaranteed debts and debts owed by businesses in the nation were 19.3%, 4.4% and 22.3%, respectively.

The ratio of debt repayment to the total import and export turnover was about 25%, meeting international regulations and practices.

Having taken these results into account, Deputy PM Hue stated that the Government’s foreign debts, which have rapidly declined, are still below the ceiling rate of 50% set by the National Assembly (NA) and under the Government’s control.

In 2018, the Government set a loan guarantee limit of US$700 million, but did not guarantee the borrowing of international loans for projects, Hue said, adding that the Government gave priority to domestic loans, thanks to their lower interest rates.

He noted that up to 48.4% of the country’s foreign debts in 2018 came from the loans of businesses, as well as financial and credit institutions without government guarantees, compared with 25.6% in 2011 and 40.4% in 2016.

The rapid increase of these debts was largely from the FDI sector, especially large-scale enterprises.

“The hike in the nation’s foreign debts helped meet capital needs and mobilize resources for its socio-economic development and growth, but also affected its capacity to pay foreign debts,” he said.

The leader asked ministries and agencies to strengthen the management of foreign debts, in line with regulations, including the Law on Public Debt Management, and resolutions of the NA and Government on public debts, to ensure the capital demand of the economy, in general, as well as the rights and obligations of enterprises.

“The targets about the public debt ceiling, the nation’s foreign debts, and debt repayment obligations, compared with total import and export turnover of goods and services, are important indicators which must be aligned with the NA’s requirements,” he said.

He also assigned the Ministry of Finance and the State Bank of Vietnam to coordinate with the concerned ministries and agencies to fine-tune regulations on management of corporate debt not guaranteed by government, and focus on supervising the total debts and debt structure, as well as assess risks for each business, in accordance with international practices.

The Ministry of Planning and Investment was tasked to review and evaluate overall foreign investment, especially large-scale projects, and the impacts of foreign loan conditions on FDI growth and attraction.

Banks lead issuance of corporate bonds

Data from the Ministry of Finance shows that the total corporate bond sales exceeded VND116 trillion (US$4.9 billion) in the first half of 2019, up 7.4% from one year ago.

Of which, VND36.7 trillion was issued by commercial banks, accounting for 36% of the total, and real estate developers issued VND22.1 trillion, or 19%. The remainders were issued by securities firms (3.5%), and other businesses.

As of late June, the capitalization of the corporate bond market was equal to 10.2% of the GDP, surpassing the set target of 7% in 2020.

Deputy PM Hue said the corporate bond market has seen strong recent growth, since businesses are in need of major capital to finance their production and business operations, whereas credit growth tends to be managed more closely, particularly in high-risk sectors, such as real estate.

He added that the corporate bond market is poised to become a channel of short- and long-term loans for the business community. It will reduce the lending pressure among commercial banks and help these banks mobilize bond capital to increase their tier-2 or supplementary capital.

Corporate bonds have long tenures, such as five-year debts making up 66% of the total issuance. Investors are mainly organizations, with individuals representing some 6.1%, he said.

However, if the issuance of corporate bonds was not closely controlled, due to their high interests of up to 14-15%, there would remain risks for investors, which could affect the credit market and macro-economic stability, he stressed.