Public debts are being managed more effectively in terms of growth of outstanding loans, loan terms, borrowers and efficiency in the use of loans, Minister of Finance Dinh Tien Dung said before the National Assembly (NA) last week.

Replying to NA deputies’ queries, he said the growth of public debts was 18.4% per year in the 2011-2015 period, but it is slowing down. He however did not give a specific figure.

Answering a question raised by deputy Tran Hoang Ngan of HCMC, the minister said that although public debts are below the permissible threshold, but the absolute number is still increasing quickly, while there remains a discrepancy between investment decisions and repayment plans. Public investment projects to some extent are still wasteful and ineffective, he said.

As stated in the Ministry of Finance’s report sent to the NA on Wednesday, as of the end of 2016, outstanding public debts were equivalent to 63.6% of gross domestic product (GDP), whereas government debts and national foreign debts were equivalent to 52.6% and 44.7% of GDP respectively. It is estimated that the respective ratios will be 62.6%, 51.8% and 45.2% of GDP late this year, way below the permissible levels.

Of government debts, the percentage of domestic loans has risen from 39% in 2011 to 60% this year, while foreign loans have dropped from 61% to 40%. This has reduced exchange rate risks and contributed to financial security.

However, disbursements of foreign loans may be faster than targets in the mid-term public investment plan in 2016-2020, exceeding by around VND300 trillion, potentially affecting security of public debts.

Capital costs and debt obligations will edge up as preferential interest rates from foreign lenders have tended to rise, especially since Vietnam is no longer considered a low-income country in line with the International Development Association (IDA) standards. Besides, the ratio of preferential loans with floating rates has also increased, heightening interest rate risks.

In addition, controls of projects using official development assistance (ODA) and preferential foreign loans are not strict.

The Government will review newly signed projects and ones which may be signed towards 2020 to evaluate their impact on public debts as well as on the mid-term financial plan.

Government to make Public Investment Law more effective

In related news, the Government has assigned the Ministry of Planning and Investment to review shortcomings in the implementation of the Law on Public Investment, and propose amendments to the Government and the National Assembly (NA) to make the law more effective, Vietnamplus news website reports.

Speaking at the fourth meeting of the 14th NA, Minister of Planning and Investment Nguyen Chi Dung said before the Law on Public Investment came into effect on January 1, 2015, public investment had largely been ineffective.

The 2005-2010 and 2011-2015 periods each had more than 20,000 public projects approved by the central Government, local authorities, ministries and departments.

However, the planners had no idea where the funding would come from, exposing many projects to cost overruns, delays or suspensions. 

Since the Law on Public Investment was issued, public investment has been more effectively managed. There will be only more than 1,000 public projects approved in the 2016-2020 period.

However, Dung said cost estimates of many approved projects has not been in line with practical conditions, causing cost overruns and delays.

Therefore, the Government has assigned the Ministry of Construction to work with related ministries to set investment norms, which will serve as the basis for calculating costs of public projects.

According to Dung, ineffective public investment has resulted from execution delays. It takes a long time for investors to complete paperwork, site clearance, compensation, tendering, and other procedures.

“To improve the effectiveness of public investment, the NA has plans to restructure public investment towards close and effective management. Certain investment procedures and regulations of the Law on Public Investment will be simplified or scrapped to facilitate the implementation of public projects,” Dung said.

Source: SaigonTimes