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IMF confident VN debt can drop to 40% of GDP
Vietnam's public debt could be cut to 40 percent of GDP by 2020, the International Monetary Fund’s representative in Vietnam said, warning however that the country does not focus enough on long-term and important projects.
The debt now stands at 51.7 percent of GDP according to The Economist, 47.5 percent according to the World Bank, and 44.7 percent according to the Ministry of Finance.
Benedict Bingham, the IMF official, also spoke about some other major issues.
He said Vietnam’s GDP can continue to grow at 7-8 percent for the next five years, with per capita income reaching the US$2,000 threshold by 2015.
But high growth was usually accompanied by inflation. According to the IMF, Vietnam’s inflation rate in the last four years had been higher than that of the Asean-4 group of Indonesia, Malaysia, Philippines, and Thailand.
Its current account deficit of 7.7 percent of GDP last year was a big contributor to the current instability and was also partly responsible for pushing up public debt.
"So, the question for Vietnam now is how to sustain the economic growth, reduce inflation, and thereby keep public debt at a stable level.”
The answer lay in having a monetary policy oriented towards low inflation and a clever fiscal policy.
It was hard to measure how much money a nation needed every year to develop its economy, but there was need for a balance between investment needs and the sustainability of the budget.
Investment in key sectors like infrastructure development, telecom, and education remained low but investors were pouring money into risky but lucrative projects that did not help the economy much.
This was an issue that needed to be tackled by 2020.
The best way to stabilize public debt was by increasing savings, improving efficiency of the use of funds, and involving the private sector in infrastructure and other important sectors.
If these policies were carried out properly, Vietnam could keep public debt stable until they started to decline sharply in subsequent years.
At best, the debt could come down to as low as 40 percent of GDP in 2020.
But this would only happen if the world economy was favorable.
Lawmakers are considering the issue of public debt at the ongoing legislature session where debt-ridden shipbuilder Vinashin is the subject of debate after running up around $4.5 billion in debts.
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