Minister of Finance Vu Van Ninh has affirmed that the current public debts of Vietnam are still within the safety line. However, Ninh said that in the long term, Vietnam needs to remain cautious with its borrowing plan.

Vu Van Ninh had a talk with press agencies on the sidelines of the ongoing National Assembly’s session on November 1 about Vietnam’s public debts.

According to the government’s report, the public debts in 2010 may reach 52.6 percent of GDP, while foreign debts 38.8 percent of GDP. The figures have raised worries among National Assembly’s Deputies that the safety line in the national finance would be broken. What would you say about that?

There are many ways to calculate public debts, and calculating debts in accordance with GDP is one of the ways. The ratio of public debt on GDP is an important norm. However, as I said before the National Assembly, it is also important to consider the debt payment capability in comparison with exports or with budget collection. The most important thing is our solvency.

I can say that we are still safe with public debts. And we are completely capable to pay all kinds of debts. This is a very important thing.

This is like a family story. If you borrow a small sum of money, but you still cannot pay debts, you will be bogged down in debts. However, if you borrow big sums of money and you still can earn money to pay debts, then no problem will occur. Therefore, I can say for sure that we are still safe with our debts.

However, I think that in the long term, we should keep cautious with our borrowing plan. The problem is that currently the debts from ODA source (official development assistance) with preferential interest rates are counting for a big proportion in the total debts. However, when Vietnam becomes a middle-income country, we will have to use commercial loans with commercial interest rates, instead of ODA.

The latest report by the National Assembly shows that a lot of national key construction projects have seen the investment capital increasing from the initial estimates. The capital for Son La hydropower plant, for example, has doubled the initial estimates. People believe that this is one of the reasons that lead to the public debt increases and ineffective capital use. What are your comments about this?

I do not agree with the viewpoint that all projects have been using capital ineffectively. I know there are some ineffective projects, but we cannot say that all of the projects have the same fate.

I have to remind you that in some projects, we have to borrow capital to develop projects, but we cannot expect to earn money from the projects to pay debts.

For example, if we build roads to mountainous areas or build schools and hospitals, we will not get money back directly from the projects. However, the projects will help develop the local economy and the society.

Meanwhile, in other projects, when we borrow money to develop them, we need to think that we must get money from the projects to cover the borrowed capital.

In general, the situation has been much improved. In the past, the state had to spend 100 percent of investment capital to build roads, while it did not expect to recover the capital. But nowadays, the state only spends a part of the total investment capital, while private investors also inject money in the projects. It is clear that it is a good strategy to mobilize capital from the society for investment and development.

What measures will the Government take to settle the current problems?

We need to build up a long term strategy for 30 years, not just 10 or 20 years. The Government will set up criteria and will supervise the implementation.

The promulgation of the Public Debt Law is also targeting the goal. It is necessary to use borrowed capital in the most effective way, while ensuring the national finance security.

Do the public debt figures count the debts incurred by state owned enterprises with the Government’s guarantee?

Yes, they do. Public debts should be understood as the debts the Government has to pay or it is likely to have to pay.

Source: VNN