Finance ministry says no need to worry about public debt, economists disagree The Ministry of Finance (MOT) says that the public debt is not as alarming as economists repeatedly claim.   One of the biggest problems, according to the economists, is that the country now has to get new loans to pay old debts. However, loans should be used to expand production, and money for debt payments should come from profits from business production expansion. Nguyen Sinh Hung, chair of the National Assembly, has said that it is unsafe to borrow money to pay debts, and that the National Assembly would agree on a government proposal to lift the ceiling for expenditures in order to stimulate investments, but not to pay debts. However, MOF has said that it is not a big problem at all to get new loans to pay old debts, if the total debt and the debt peaks at certain moments do not exceed the safety threshold set by the National Assembly and the government. The ministry said that although the total public debt had increased recently, the ratio of public debt of the Gross Domestic Product (GDP) remained unchanged. The ratios were 51.7 percent in 2010, 50.1 percent in 2011, 50.8 percent in 2012 and 54.1 percent in 2013. Regarding the debt payment duty, Truong Hung Long, director of the MOF’s Debt Management and External Finance Department, said in principle the debt payment must not be higher than 25 percent of the state’s revenue. Meanwhile, the state’s debt payment in 2013 only accounted for 12.6 percent of the budget’s revenue. A question has been raised about Vietnam’s borrowing new loans to pay old debts, when the ratio of the debt the state has to pay on its revenue is not high. Does Vietnam have more than enough money to pay its debts? On this issue, Long said that in principle, it would be better to seek both short-term and long-term capital to optimize efficient use of capital. “In the past, Vietnam had to borrow money at high interest rates, but the interest rates are lower now. Why don’t we grab the opportunity to get cheaper capital?” he said. “The important story here is that the government needs to have good management skills to borrow money at the lowest possible costs,” he said. Nevertheless, despite the MOF’s explanation, economists continue to worry about the public debt situation. Vu Dinh Anh, a renowned economist, pointed out that the debt duties have been increasing, while MOF says nothing about where the money to pay for the debts would come from. In principle, the government needs to apply necessary measures to gradually reduce the loans to offset the budget deficit. In other words, it needs to find sources of revenue in the future to make up the budget deficit now. “However, no state management agency has figured out a plan to reduce the budget deficit. This is really worrying,” Anh said. TBKTVN