Vietnamese government seeks legislative nod to issue $3bn in sovereign bonds in 2017

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Vietnamese government seeks legislative nod to issue $3bn in sovereign bonds in 2017

The government is seeking the permission of the law-making National Assembly to issue US$3 billion in sovereign bonds in 2017, local media reported. The bid to secure the approval from the legislature was announced by Minister of Finance Dinh Tien Dung at a National Assembly Standing Committee meeting on Monday.

The future bond offering aims at restructuring domestic debts incurred during 2015-16, following a successful $1 billion sovereign bond issuance last year.

In November 2014, Vietnam sold $1 billion worth of sovereign bonds with a ten-year maturity term and a yield of 4.8 percent – the first in nearly five years and the third in its history – in the U.S., according to the Ministry of Finance.

The terms of the proposed new bonds will be longer, from 10 to 30 years, and the interest rates will be set depending on international capital market conditions at the time of issuance, Minister Dung said.

The 2017 sovereign bond issuing, if approved by the National Assembly, will help finance the debt repayment for government bonds maturing in the 2015-16 period, which may amount to VND363.17 trillion ($16.14 billion), the official added.

Meanwhile, the money that the government borrowed to compensate for national budget overspending was still limited in the first nine months of this year with VND127.50 trillion ($5.67 billion), meeting only half of the annual target, while the amount of debts due in the period reached VND160.70 trillion ($7.14 billion), the minister said.

International bond issuances were necessary, as "other domestic funding sources had been mobilized at the maximum level,” while Vietnam no longer enjoyed financial assistance from the World Bank's International Development Association, the Vietnam News Agency quoted Minister Dung as saying.

The new bond issuance, if implemented, still guarantees that foreign debts account for no more than half of total government debts, in line with the country's strategy to manage public debts until 2020, with a vision toward 2030, Minister Dung said.

Moreover, the issuance will help ease the pressure on domestic banks' foreign currency resources, enabling them to maintain low interest rates for the local currency, the Vietnamese dong, to support local enterprises.

The ministry's latest report said the state budget overspending had hit some VND27.54 trillion ($1.22 billion) in September, driving the cumulative deficit in the first nine months of this year up to VND140.97 trillion ($6.27 billion).

According to news website the Saigon Times Online, the Ministry of Finance will borrow an additional $1 billion from Vietcombank at a rate of 3-4 percent per year, lower than the interest of 4.8 percent in a $1 billion loan the bank offered to the ministry in May.

Meanwhile, the ministry already received VND30 trillion ($1.35 billion) it had borrowed from the State Bank of Vietnam, Dao Xuan Tue, deputy director of the State Budget Department under the finance ministry, said at a press meeting in Hanoi on October 2.

As of Sunday, Vietnam’s public debt per capita had surpassed the $1,000 mark after its total public debt reached $92.64 billion, according to the global debt clock run by The Economist.

Vietnam’s public debts are projected to make up 62.3 percent of the country’s gross domestic product (GDP) by the end of this year, still within the permitted debt ceiling of 65 percent, Truong Hung Long, head of the Department of Debt Management and External Finance under the finance ministry said at a conference in Hanoi last month.

The Vietnamese government has borrowed around VND360 trillion ($15.84 billion) annually in the 2010-15 period, he said.

Government-guaranteed loans and local government borrowing during that period were estimated to top VND93 trillion ($4.1 billion) and VND15 trillion ($660 million) per year.

Long said that foreign loans, which have been used for relending to investment and development projects that can repay punctually, have attained some VND237 trillion ($10.43 billion) during the last five years.