VN government turns focus to long-term bonds
The finance ministry is set to earn VNĐ340 trillion (US$15.1 billion) for the State budget this year, including VNĐ184 trillion for offsetting the overspending of the budget and VNĐ156 trillion for the Government’s debt payment.
Based on this request, the finance ministry and its agencies will focus on issuing long-term Government bonds to raise that amount.
According to the Việt Nam State Treasury, the policies related to bond issuance have been adjusted.
For example, the State Bank of Việt Nam (SBV) issued a Circular 06/2016/TT-NHNN in May 2016 to amend the Circular 36/2014/TT-NHNN regulating prudential ratios for the operations of credit institutions and foreign bank branches.
Therefore, foreign investors have been paying more attention to the Việt Nam’s Government bond market.
Recently, the Việt Nam State Treasury issued bonds for various terms between three years and 30 years, focussing on five-year bonds to extend the average maturity and reduce the pressure on the Government’s debt payment in short term.
Besides, Government agencies have held talks with members from the market to receive and respond to demands of investors, as well as their complaints and difficulties.
According to a report from the finance ministry, in 2016, the finance sector focussed on issuing bonds with maturity terms of five years. The volume of those bonds was 91.1 per cent of the total bonds issued in 2016, exceeding the target of 70 per cent set by the National Assembly.
The average bond yield rate last year was 6.59 per cent per year, a decrease of 54.5 per cent from the rate in 2011, and 17 per cent from the rate in 2013.
The conversion of the bonds that have a maturity term below five years has been done successfully to restructure the government’s loan portfolio.
At the end of 2016, the ratios of domestic and foreign loans in the Government’s total debt were 59 per cent and 41 per cent, respectively. The ratio of domestic loans has increased in comparison to the previous years, which matched the government’s plan to reduce its dependence on overseas lending.
In 2016, the finance ministry and its agencies did well to mobilise the capital for Government spending, and worked well with the SBV to implement monetary policies on credit growth to improve domestic production.
In 2016, the finance ministry issued a total VNĐ281.75 trillion worth of Government bonds, raised VNĐ55 trillion from social insurance, and disbursed $1.9 billion worth of official development assistance (ODA) loans and preferential loans to meet the target of budget spending and make the investment in socio-economic development projects.
