What does the Finance Ministry say about Vietnam’s public debt structure? Vietnam’s public debt rose by about 12.2%, from 50% of GDP in 2011 to 62.2% at the end of 2015. Admitting the rapid increase of public debt, the Ministry of Finance (MOF) has confirmed that the structure of Vietnam's public debt is gradually being adjusted towards more sustainability with the ratio of foreign debt declining.   Mr. Vo Huu Hien, Deputy head of the Debt Management and External Finance Department of the MOF, said the structure of public debt of Vietnam by the end of 2015 included: government debt accounting for 80.8%, Government guaranteed debt 17.8%; and local government debt 1.4%. In the government debt structure, the part of domestic debt rose from 39% in 2011 to 57% in 2015 while the proportion of foreign debt decreased from 61% in 2011 to 43% in 2015. Hien affirmed that such development is consistent with the national strategy on public debt and external debt in the 2011-2020 period and the vision to 2030. According to Hien, the average interest rate of government bonds issued in the domestic capital market reduced from 12%/year in 2011 to around 6.5% in 2014 and about 6% in 2015, contributing to promote the development of the domestic bond market. For foreign loans, as ODA and preferential loans accounted for a large proportion, the average interest rate as of the end of 2015 was about 2%/year. Currency structure of the debt portfolio of the Government focuses on a number of major currencies, including: the Vietnam dong with the proportion of 55%; USD 16%; Japanese yen 13%; the euro approximately 7%; and other currencies. Hien said the Ministry of Finance analyzed Vietnam’s public debt sustainability with the World Bank (WB) and the International Monetary Fund (IMF) and concluded: "The structure of Vietnam's public debt is gradually being adjusted towards more sustainability." Growth falls but borrowing requirements still strict It should be noted that in 2011-2015, public debt increased by about 12.2%, from 50% of GDP in 2011 to 62.2% at the end of 2015 compared with an increase of 9% in the period of 2006-2010. Thus, the structure of debt is sustainable but the outstanding public debt is rising rapidly. Hien said the reason for the quick increase of public debt is the pressure to mobilize capital for economic - social development. In the period of 2001-2005, social investment averaged 39% of GDP and it rose to 42.9% of GDP in the 2006-2010 period. In the 5 years from 2011 to 2015, although social investment reduced, it was still high – about 32% of GDP. "Investment was at a relatively high level, while the savings rate of the economy for investment was only about 25% of GDP, leading to a shortage of funds for investment, meaning that Vietnam had to borrow," said Hien. Vietnam is a developing country so it is forced to increase borrowing for investment, especially in infrastructure projects, thereby making the scale of debt to increase. The country's economic context in the period of 2011-2015 was unfavorable, especially the reduction of the economic growth target from the average of 7-7.5%/year to 6.5 to 7.0%/year. Growth - the basis for the calculation of fiscal indicators, overspending, and loans – decreased while demand for loans and other targets were maintained in order to increase resources for economic development and ensuring social security. As a result, the ratio of public debt to GDP rose. In addition, the devaluation of the Vietnam dong and the unpredictable fluctuation of other currencies like the US dollar, JPY, and CNY also made the scale of the Government debt increase when they were converted into Vietnam dong. Hien said the public debt cannot be reduced overnight, but under a roadmap, under which new loans and state-invested projects must be carefully monitored. In addition, the Government is determined to cut the state budget deficit under the plan approved by the Party and the National Assembly in the 2016-2020 period. Na Son, VNN