What is Government Debt? Public debt classification in Vietnam

What is Government Debt? Public debt classification in Vietnam (Internet image)

1. What is Government Debt?

Government debt means a debt arising from an internal or external loan which is signed or issued in the name of the State or the Government.

(Clause 1, Article 3 of the Law on Public Debt Management 2017)

2. Public debt classification in Vietnam

Article 4 of the Law on Public Debt Management 2017 stipulates public debt classification as follows:

- Government debts include:

+ Debts arising from issue of debt instruments by the Government;

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

+ 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.

- Sovereign-guaranteed debts include:

+ Debts of enterprises guaranteed by the Government;

+ Debts of banks for social policies guaranteed by the Government.

- Provincial debts include:

+ Debts arising from issue of provincial bonds;

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

+ 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

3. Purposes of the Government's loans in Vietnam

Article 25 of the Law on Public Debt Management 2017, the purposes of the Government's loans are as follows:

- Financing budget deficit for development investment but not recurrent expenditures.

- Financing temporary central budget deficit and ensure the liquidity of sovereign bond market.

- Paying due principal and restructuring Government debts.

- Grant ODA on-lent loans or external concessional loans to People’s Committees of provinces, public sector entities and enterprises.

4. Forms of Government loans in Vietnam

In Article 26 of the Law on Public Debt Management 2017, the forms of Government loans include:

- Issues of debt instruments;

- Conclusion of loan agreements.

Note: The Government may borrow in local and foreign currencies, precious metal or goods of local or foreign currency equivalence.

5. Issues of debt instruments in domestic capital market in Vietnam

Pursuant to Article 27 of the Law on Public Debt Management 2017, the issuance of debt instruments in the domestic capital market is as follows:

- Debt instruments of the Government include:

+ Sovereign bonds;

+ Treasury bills;

+ Development bonds.

- According to an annual public borrowing and repayment plan, the Ministry of Finance shall issue debt instruments of the Government.

- The process for issuing debt instruments shall be through bidding, underwriting or private placement.

- Total the Government loans shall be included in the central budget. The Government must set aside an enough sum of money to repay principal, interests, and other related expenses on a due debt.

- The Government sets forth issues, registration, deposit, listing and dealings of debt instruments of the Government in the securities market.

6. Public debt information disclosure in Vietnam

Article 61 of the Law on Public Debt Management 2017 stipulates public debt information disclosure as follows:

- Indicators of public debts to be disclosed comprise:

+ Government debts, including external debts listed by lenders; government debt instruments listed by instrument types;

+ Provincial debts, including provincial bonds, ODA on-lent loans, external concessional loans, loans taken out from state funds, and other loans;

+ Sovereign-guaranteed debts, including outstanding debts and advances from the debt repayment fund (if any).

- Information about public debts under the list of state secret matters shall be provided and disclosed in accordance with laws and regulations on state secret protection.

- The powers to disclose public debt information:

+ The Ministry of Finance shall disclose information on public debts;

+ Presidents of People’s Committees of provinces shall disclose information on provincial debts.

- Public debt information shall be disclosed in the following forms:

+ Websites of the Ministry of Finance and the People’s Committees of provinces;

+ Press conferences, press releases;

+ Public debt newsletter.

- Public debt newsletters shall be issued biannually by the Ministry of Finance in Vietnamese and English translation in the form of publication and data in the website of the Ministry of Finance.

- Ministries, ministerial-level agencies, People’s Committees of provinces, intermediary borrowers, and relevant agencies shall cooperate with the Ministry of Finance in collating and confirming data of public debts and relevant matters.

Ngoc Nhi

>> CLICK HERE TO READ THIS ARTICLE IN VIETNAMESE