Viet Nam Human Rights
Reducing public debt
17/1/16
After nearly a decade to keep public debt at nearly
0%, Fed has increased the base rate by 0.25% in the dollar. This move was seen
as steps to prevent misfortune occurs in the future of the Fed, and the agency
also announced that interest rates will continue to be adjusted gradually in
2016 with a small dose to prevent economic shocks. Many experts assessed, the
increase in dollar interest rates by the Fed does not impact much to the world
economy in the short term, but in the long term, the possibility of interest
rates in Europe will certainly increase. This could pose some concern about
public debt interest to Vietnam, especially the foreign loans.
According to the experts of the National Financial
Supervisory Commission, the impact of US interest rate increases on foreign
debts of Vietnam will not be large because of the total debt was VND, the rest
is USD and other currencies. Among foreign loans, the share of the dollar
accounted for 50%. If the dollar rises, there will be less expensive in another
one, leading to rising debt impact is negligible.
However, it is necessary to think in the near future,
if the dollar continues to be highly appreciated, the debts will certainly
increase by the structure related to the dollar. That's not to mention the
project of foreign loans will increase under the terms of less favorable loan
because it is expensive and difficult capital to use with concessional loans
requiring the beneficiary must intelligent and dynamic. If preferential loans
use only one currency as the token money, for less concessional loans, the
borrower must consider carefully to choose the lending currency in a basket of
currencies including dollars, yen ( Japan) or Euro so that the exchange rate
risk is the lowest. At the same time, the repayment period of the less
favorable loan is shorter, the borrowers must be smart to use this provision
for the feasible and effective project. Therefore, the question here is not the
appreciation of foreign currencies with foreign loans, it is the effective use
of capital.
In terms of public debt is soaring at present, the very
clear message of the government is to effectively use foreign loans. To
accelerate the life cycle of project, we will have to implement the approach
and new funding models, including allocating structure. This solution will be
rated as basic, fundamental nature, decided to fight the spread of investment
to extend the projects (which are the cause of much interest, especially the exchange
rate risk). Accordingly, we need to expand the application forms for commercial
banks to borrow foreign capital for the involved banks to arrange reciprocal
capital for projects and credit risk (as in the rural finance projects,
renewable energy projects and projects for small and medium enterprises...).
According to many expert reviews, this is the most feasible solution to reduce
the pressure on domestic counterpart funds, the exchange rate risk and pressure
on government debt but still meet the needs of capital for economic - social development
and oriented implementation of the set out development goals.
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All comments [ 10 ]
Budget shortages have been a serious problem for our country for many years.
Though we have the National Budget Law, the State budget is still divided into two segments: "within the budget balance sheet" and "outside the budget balance sheet". Meanwhile, the budget within the balance sheet is separated into the Central Government budget and local Government budget.
There are various reasons for the overspending, particularly the increase in public employees working in Government agencies, the Party and social organisations.
It is necessary to upgrade infrastructure, but we should take steps suitable for our financial situation.
In Viet Nam we have 63 cities and provinces, but up to 50 provinces cannot balance their revenue and spending. They have to rely on support from the State budget.
In my opinion, it is time for us to restructure revenue collection and spending mechanisms.
Most countries have to borrow money for development. But the issue here is the purpose of the borrowing. If the money is borrowed to buy cars or pay government officials and public employees' salaries, I don't think we should do it.
if we borrow the money to build infrastructure projects or to repay debts with low interest, I think we should.
the issue here is that we should be transparent about how we use the borrowed money, with supervision from the public and relevant agencies.
regular spending has increased considerably, including salaries for staff working in Government agencies and social organisations. So I think it is high time for us to think about who should receive salaries from the State budget and who should not.
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