What is a debt instrument in Vietnam? What do Government debts, Sovereign-guaranteed debts, Provincial debts in Vietnam comprise?

What is a debt instrument in Vietnam?

Law on Public Debt Management 2017 does not define what a debt instrument is. However, Clause 9, Article 3 of Law on Public Debt Management 2017 stipulates:

9. ”debt instrument” refers to a bond, a treasury bill, or development bond, which gives rise to debt obligations.

Besides, according to Clause 10, 11, 12, 13, 14, 16, Article 3 of Law on Public Debt Management 2017 stipulates:

10. ”sovereign bond” means a debt instrument issued by a government intended for raising funds for state budget or debt restructuring.

11. ”provincial bond” means a debt instrument issued by a People’s Committee of province for raising funds for local budget.

12. ”sovereign-guaranteed bond” means a debt instrument issued by an enterprise or a bank for social policies and guaranteed by the Government.

13. ”treasury bill” means a debt instrument issued by Vietnam State Treasury for a term of up to 52 weeks.

14. “development bond” means a bond issued by the Government intended for raising capital from citizens to build important national projects and other facilities serving production, life and infrastructure for the country.

16. “debt service" refers to principal, interests, and other related fees that become due for a particular period.

What do Government debts, Sovereign-guaranteed debts, Provincial debts in Vietnam comprise?

According to Article 4 of Law on Public Debt Management 2017 stipulates:

1. Government debts include:

a) Debts arising from issue of debt instruments by the Government;

b) Debts arising from internal and external loan agreements concluded by the Government;

c) Debts arising from central government budget’s loans borrowed from financial reserve fund of state, state funds available on State Treasury’s accounts (hereinafter referred to as state funds), or off-budget financial fund.

2. Sovereign-guaranteed debts include:

a) Debts of enterprises guaranteed by the Government;

b) Debts of banks for social policies guaranteed by the Government.

3. Provincial debts include:

a) Debts arising from issue of provincial bonds;

b) Debts arising from ODA on-lent loans, external concessional loans;

c) Debts arising from local government budget’s loans borrowed from banks for social policies, financial reserve fund of provinces, state funds, and other loans as per the law on state budget.

Principles for public debt management in Vietnam

According to Article 5 of Law on Public Debt Management 2017 stipulates:

1. The state shall uniformly manage public debts and ensure that entities in connection with public debt management shall fulfill their responsibilities and exercise their power as prescribed.

2. Strictly control indicators of public debt safety, ensure a safe and sustainable national finance with macroeconomic stability.

3. Any proposal, appraisal, and approval for a borrowing policy, negotiation and conclusion of loan agreement, issue of debt instruments, or allocation and use of loans must be carried out with proper purposes and effectiveness. A loan granted for financing budget deficit is only used for development investment, not recurrent expenditures.

4. A borrower, end borrower, or sovereign-guaranteed borrower shall discharge obligations tied to a loan, an on-lent loan or a sovereign-guaranteed loan respectively fully and on schedule. An ODA on-lent loan, external concessional loan, or sovereign-guaranteed loan may not be converted into allocated capital of state budget.

5. Ensure that any public debt is calculated accurately and sufficiently; ensure the transparency in public debt management associated with responsibilities of relevant entities in public debt management.

Best Regards!