Vietnam’s public debt on track to unhealthy high levels

ADB economist Dominic Mellor said Vietnam may face public debt risks as the country may experience widening state budget deficit.

“If Vietnam’s state budget revenues are lower that the set target, the government will prefer state budget deficit rather than expense cut. So, the country’s public debt rate may account to 60% of its GDP in 2016,” he said.

The statement comes as corporate income tax cuts and exemptions, the removal of the tariffs and lower oil prices are expected to seriously affect Vietnam’s state budget revenues as state spending continues to rise, by between 5% and 20% depending on sectors.

Vietnamese economist Le Dang Doanh, former director of the Central Institute for Economic Management (CIEM), said the country’s current method of calculating public debt is inappropriate and its real public debt rate may be much higher than the current rate, surpassing the acceptable rate of 65% of GDP.

“I’ve warned for several times that the country’s public debts are sharply increasing," Doanh said. "The state budget must spend around VND282 trillion, or 31% of state budget revenues, on paying public debts in 2015, while its regular expenses account for 72% of the state budget revenues. This means that that country has no money for investment and this is really dangerous."

Apart from measures to strictly manage public debts and prevent budget wastefulness, the government should work out a specific strategy for public debt payment, Doanh said.