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VN aims to lift sovereign credit rating
The Ministry of Finance has submitted a scheme to the Prime Minister for improving Viet Nam's sovereign credit rating, with a target for the country to achieve investment grade by 2020.
Currently, the nation maintains credit ratings from Standard&Poor's, Moody's and Fitch Ratings. S&P gives the country an overall rating of BB-, while Moody's rates it B1 and Fitch gives it a B+ rating, all three or four levels below investment grade.
Under the proposed scheme, the ministry highlighted measures relating to institutional and economic management that include boosting social welfare policies to narrow the gap between rich and poor and among regions of the country.
Next, measures would be undertaken to ensure sustainable growth and development, including restructuring of public investment, State-owned enterprises, credit institutions and the stock market. The Government would also tighten fiscal policy to reduce the State budget deficit to 4.5 per cent of GDP by 2015 and 4 per cent by 2020.
Monetary policy would be more closely co-ordinated with market signals to control dollarisation of the market and a flexible foreign exchange policy would put the priority on curbing inflation, reducing the trade deficit, ensure the international balance of payments, and stabilising the economy.
Finally, public debt would be managed through an improved legal framework and debt management tools.
In March, the ministry selected Standard Chartered as a sovereign credit ratings advisor to the Government. Last week, at meeting held by Standard Chartered and the State Bank of Viet Nam, the State Bank's deputy director of international co-operation, Do Viet Hung reconfirmed that the sovereign credit rating was viewed as the national credit image in the eyes of the international community of investors, with ratings capable of affecting the country's ability to raise capital necessary for socio-economic development.
Standard Chartered, with it significant onshore presence, would provide experienced local insight to the rating agencies and the broader investor community on behalf of the Vietnamese Government, according to a statement on the bank's website. It would also share its experience and give recommendations to Vietnamese agencies on provision of information to rating agencies in order to achieve optimum credit ratings.
The sovereign credit rating is an important indicator for international investors and a tool used to determine a country's borrowing cost in international capital markets. Improvement of sovereign credit ratings can also help a country attract greater foreign investment.
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