What are objectives of public debt risk management in Vietnam? What are principles for handling public debt risks in Vietnam?

What are objectives of public debt risk management in Vietnam? What are principles for handling public debt risks in Vietnam?

Pursuant to Article 22 of the Decree 94/2018/NĐ-CP stipulating objectives of public debt risk management in Vietnam as follows:

1. To ensure logical structure of public debts that conforms to objectives and orientations for the 5-year public borrowing and repayment plan ratified by the National Assembly

2. To ensure public debts may be repaid on schedule and improve quality of public debt management

3. To minimize losses that could incur in the worst situation and ensure expenses incurred may be fully covered.

Pursuant to Article 23 of the Decree 94/2018/NĐ-CP stipulating principles for handling public debt risks in Vietnam as follows:

1. Risks may be handled on a case-by-case basis according to the potential loss level and causes for risks.

2. Risks must be prevented and handled according to the loan contracts or principal instruments in the current public debt portfolios and causes for risks adherence to regulations of Vietnam law and international practice.

3. Risks faced by public debt portfolios must be prevented and handled in consistent with the 5-year public borrowing and repayment plan, 3-year public debt management program and annual public borrowing and repayment plan.

4. Organizations and individuals that use loans for improper purposes or intend to violate the law provisions, resulting in public debt risks must take responsibility to handle those risks and pay compensation in accordance with the law provisions.

What are regulations on identification and assessment of public debt risks in Vietnam?

Pursuant to Article 24 of the Decree 94/2018/NĐ-CP stipulating public debt risk identification in Vietnam as follows:

1. Public debt risks include:

a) Risks of interest rate and foreign exchange rate due to fluctuation of the financial market;

b) Liquidity risks due to lack of financial assets to be easily changed into cash to meet due debt obligation as committed, including capacity to repay public debts of central government budget and local government budget;

c) Risks from fluctuations of the financial market that affect loan raising resulting in rollover with high costs or incapacity for rollover;

d) Credit losses caused by end-borrowers or guaranteed-borrowers that fail to fully repay their debts on schedule;

dd) other risks likely to affect the public debt safety

2. Credit losses caused by end-borrowers and sovereign-guaranteed borrowers shall be managed in accordance with regulations in the Government Decree on ODA loans to be on-lent and Government’s external loans and Decree on provision and management of sovereign guarantee.

Pursuant to Article 25 of the Decree 94/2018/NĐ-CP stipulating public debt risk assessment in Vietnam as follows:

1. Risk assessment shall at least contain:

a) analysis of macroeconomics, fiscal policy, currency, exchange rate, interests and fluctuations of domestic and international capital markets that affect public debts

b) analysis and assessment of currency structure, interest, loan period, scale, public debt service, reality and future view for the purpose of indentifying risks to work out appropriate risk handling methods

c) determination of risk level and expectation of costs for preventing and handling risks if any incurs

2. Risk assessment shall be carried out as follows:

a) The Ministry of Finance shall assess public debt risks, including Government debts, provincial debts and sovereign-guaranteed debts.

b) People’s Committees of provinces shall assess risks associated to provincial debts, including ODA loans to be on-lent and Government concessional loans, provincial bonds and other provincial debts.

3. Risk assessment must be periodically carried out in conjunction with the 5-year public borrowing and repayment plan, 3-year public debt management program and annual public borrowing and repayment plan.

4. According to risk assessment, the Ministry of Finance shall suggest solutions for preventing public debt risks while People's Committees of provinces shall suggest solutions for preventing risks associated to provincial debts.

What are methods and for preventing and handling public debt risks in Vietnam?

Pursuant to Article 26 of the Decree 94/2018/NĐ-CP stipulating methods and for preventing and handling public debt risks in Vietnam as follows:

1. Risks of interest rate and foreign exchange rate shall be prevented by using interest rate and currency derivatives.

2. Liquidity risks shall be prevented by setting aside an amount of money to fully repay debts on schedule as prescribed in Article 54 of the Law on Public Debt Management and issuing debt instruments for ensuring liquidity, rescheduling, purchasing or swapping debts and negotiating for debt extension.

3. Risks from fluctuations of financial market shall be prevented by developing domestic capital market and improving the sovereign credit rating in pursuit of reaching out for international capital market.

4. According to risk assessment and extent of negative impacts of risks on each debt or debt portfolios, the Ministry of Finance shall prepare a debt restructuring plan and submit it to the Prime Minister for ratification the implement such plan while People's Committees of provinces shall send a plan for restructuring provincial debts to People's Council of provinces for ratification then implement such plan.

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