Decision No. 231/2006/QD-TTg dated October 16, promulgating the Regulation on formulation and management of the system of indicators for assessment and supervision of the national foreign debt status

DECISION

PROMULGATING THE REGULATION ON FORMULATION AND MANAGEMENT OF THE SYSTEM OF INDICATORS FOR ASSESSMENT AND SUPERVISION OF THE NATIONAL FOREIGN DEBT STATUS

THE PRIME MINISTER

Pursuant to the December 25, 2001 Law on Organization of the Government;

Pursuant to the Government's Decree No. 134/2005/ND-CP of November 1, 2005, promulgating the Regulation on management of foreign loans and payment of foreign debts;

At the proposal of the Finance Minister,

DECIDES:

Article 1.- To promulgate together with this Decision the Regulation on formulation and management of the system of indicators for assessment and supervision of the national foreign debt status.

Article 2.- The Finance Ministry shall base itself on this system of indicators to synthesize, analyze, assess and supervise the foreign debt status; and periodically report it to the Prime Minister.

Ministries, ministerial-level agencies, provincial/municipal People's Committees and units using foreign loans shall closely coordinate with the Finance Ministry in supplying relevant information, calculating indicators for assessment and supervision of foreign debts, and directing their attached units to comply with the provisions of this Regulation.

Article 3.- This Regulation takes effect 15 days after its publication in "CONG BAO."

Ministers, heads of ministerial-level agencies, heads of government-attached agencies, and presidents of provincial/municipal People's Committees shall implement this Decision.

REGULATION

ON FORMULATION AND MANAGEMENT OF THE SYSTEM OF INDICATORS FOR ASSESSMENT AND SUPERVISION OF THE NATIONAL FOREIGN DEBT STATUS

Chapter I

GENERAL PROVISIONS

Article 1.- Scope of application

This Regulation applies to the formulation and management of the system of general indicators on national foreign debts, debt safety thresholds, borrowing limits, responsibilities of the prime agency and concerned agencies in assessing the foreign debt status, in order to formulate and (or) adjust appropriate strategies and policies on government loans and ensure the national debt safety.

Article 2.- Interpretation of terms

1. Terms and expressions referred to in this Regulation have the same meanings as those in the Government's Decree No. 134/2005/ND-CP of November 1, 2005, promulgating the Regulation on management of foreign loans and payment of foreign debts (referred to as Decree No. 134/2005/ND-CP). The terms and expressions below are construed as follows:

2. System of foreign debt indicators consists of general indexes reflecting the debt level of an economy, the capability of a nation to pay debts to foreign creditors in comparative relations to macroeconomic indicators.

3. Assessment and supervision of the foreign debt status mean the constant assessment and supervision of the foreign debt status, or the analysis of the list of debts by the Government and the concerned state management agencies on the basis of the system of foreign debt indicators in order to promptly detect signs of the economy's international payment imbalance or the public and private sectors' financial difficulties in payment of foreign debts, well control risks so as to properly and promptly adjust the borrowing policy and the list of debts, thus ensuring the debt sustainability within the safety thresholds and the national financial security.

4. Agency assuming the prime responsibility for assessment and supervision of debts means the Finance Ministry.

5. Coordinative agencies for the assessment and supervision means the State Bank of Vietnam, the Planning and Investment Ministry, the General Office of Statistics, the Trade Ministry, and other ministries, ministerial-level agencies and provincial/municipal People's Committees that use government foreign loans.

6. Total foreign debts means national foreign debts defined in Clause 8, Article 2, Chapter I of the Regulation on management of foreign loans and payment of foreign debts, promulgated together with Decree No. 134/2005/ND-CP.

7. Present value of foreign debts (PV FD) means total future liabilities to pay debts (principals and interests) of total existing foreign debts calculated at the present time by the method of discount at market interest rates.

8. Gross domestic product (GDP) means newly created value of goods and services of the whole economy in a given period of time, calculated at real prices and shown by figures announced by the General Statistics Office.

9. The state foreign reserves (FR) means property in foreign exchange reflected in the monetary balance sheet of the State Bank of Vietnam and shown in figures announced by the State Bank of Vietnam according to current provisions of law.

10. Export value of goods and services in period (EX) means the value of goods and services exported in the supervised period, shown in figures announced by the General Office of Statistics.

11. Annual debt service (DS) means the total liability to pay foreign debt principals and interests in a year, shown in figures announced by the Finance Ministry.

12. Annual debt service for government debts (DS GD) means the total liability to pay principals and interests of government debts (including both domestic and foreign debts) in a year, shown in figures announced by the Finance Ministry.

Article 3.- Objectives of assessment and supervision of the foreign debt status

1. To constantly oversee the situation of foreign debts in order to early identify latent risks in the list of national debts and relevant problems in the debt management (if any) in particular and in the correlation with domestic and overseas economic environments in general.

2. To help the agency responsible for debt supervision propose to the Government measures to draw up and maintain a reasonable list of debts, promptly adjust the list of debts when necessary and maintain the sustainability of national debts in medium-long terms; ensure the financial and monetary security; optimize capital mobilization plans and minimize risks and expenditures for the state budget and the whole economy.

3. To serve as a basis for the formulation of debt policies and strategies and capital mobilization strategies; work out annual borrowing and debt payment plans with the lowest costs, and well control risks; ensure the compliance with the State's socio-economic development orientations and policies.

4. To help organizations and units using foreign loans monitor their own investment, production or business activities, and become aware of abnormal circumstances so as to devise as soon as possible remedies and to develop.

5. To enhance financial transparency and management of reserve liabilities.

6. To raise the efficiency of financial analysis and forecast, contributing to improving the effectiveness of management and formulation of macro-economic policies in a given period.

Article 4.- Principles for assessment and supervision of the foreign debt status

1. The assessment and supervision must be conducted in a constant and regular manner.

2. The assessment and supervision of foreign debts must be associated with the assessment and supervision of the Government's domestic debts and the supervision of reserve liabilities.

3. The compliance with regulations and guidance must be ensured; proposals and petitions must be timely, specific and feasible.

Chapter II

THE SYSTEM OF FOREIGN DEBT INDICATORS

Article 5.- Group of indicators of national foreign debts

This group consists of major indicators assessed and supervised according to the debt safety threshold and support indicators not assessed and supervised according to the debt safety threshold but used in service of the analysis and assessment of the national foreign debt status.

1. Major indicators assessed and supervised according to the debt safety threshold:

a/ Present value of foreign debts against GDP (PV FD/GDP);

This indicator reflects a nation's foreign debt level compared with its resources and is calculated at the year-end.

b/ Present value of foreign debts against export value of goods and services (PV FD/EX):

This indicator reflects the sustainability of foreign debts shown in a nation's capability to make present and future payment of foreign debts with its export revenues without resorting to debt relief or rescheduling.

c/ Present value of foreign debts against gross revenues (PV FD/GR):

This indicator reflects the capability to pay foreign debts at present and in the future with the Government's budget sources. This indicator is particularly important on the condition that revenues from the export of goods and services are limited.

d/ Debt service against export value of goods and services (DS/EX):

This indicator reflects the ratio of revenues from national exports which must be set aside for payment of foreign debts.

e/ Debt service against gross revenues (DS/GR):

This indicator reflects the present burden of debt payment against gross revenues. This indicator is particularly important when government foreign debts make up a large proportion in total national foreign debts.

f/ The state foreign reserves against total short-term foreign debts (FR/STD):

This indicator reflects the capability of the state foreign exchange reserves to be used for payment of short-term foreign debts. This is an important indicator on the condition that the nation is unable to access or has a limited access to the international capital market.

2. Support indicators not assessed or supervised according to the debt safety threshold but used in service of the analysis and assessment of the debt status:

a/ Total foreign debts, structure of foreign debts under the following principal conditions: foreign debts classified according to groups of creditors, borrowing conditions (preferential or non-preferential), currencies of loans, terms of loans (short and medium-long terms), overdue debts (if any) and borrowed and repaid amounts in a year. These indicators show the present national debt status and serve the assessment of the list of foreign debts at a given time;

b/ Average interest rate of foreign loans means the loan interest rate calculated on the basis of the weighted average interest rate of loans with different borrowing conditions, and shown by figures announced by the Finance Ministry. This is a useful index for comparison with the nation's export growth rate or GDP growth rate;

c/ Average term of foreign loans means the loan term calculated on the basis of weighted average term of loans with different terms. This is a useful index, especially for loans other than government loans, for overseeing loans that are about mature or reckoning the necessity of measures to restructure debts (debt rescheduling) in order to limit risks for the economy.

Article 6.- Group of indicators of the government's and the public sector's foreign debts

1. Foreign loans for offsetting state budget deficits

This indicator reflects the capability to mobilize sources of foreign loans to offset annual state budget deficit of a nation, especially a developing nation, when investments need to be promoted while savings for investment are limited. This indicator is calculated in percentage (%) to GDP.

2. Present value of foreign debts of the public sector against GDP (PV PD/GDP).

This indicator reflects the foreign debt level of the public sector compared with national resources, and is calculated at the year-end.

3. Debt service for government debts against gross revenues

This indicator reflects the Government's capability to pay its existing liabilities (including domestic liabilities).

4. Debt service for government foreign debts against gross revenues (DSExt/GR)

This indicator reflects the Government's capability to pay its foreign debts.

5. Reserve liabilities against gross revenues

A reserve liability means a balance at each given point of time of all principals, interests and fees payable for government-sublent loans and government-guaranteed loans. This indicator presents insurmountable risks incurred to sub-borrowing partners and guaranteed partners and may be borne by the state budget in performing obligations toward foreign lenders. The calculation of this indicator covers not only the consideration of the nominal value of reserve liabilities but also the assessment of these liabilities' risk level. The higher this level the greater risk of sub-loans and guarantees.

Article 7.- Group of indicators of enterprises' foreign debts

The group of indicators of enterprises' foreign debts consists of the following indicators:

1. Short-term debts/total foreign debts of enterprises.

2. Due debts in a period/total foreign debts of enterprises.

3. Period-end balance of overdue debts/total foreign debts of enterprises.

Chapter III

DEBT SAFETY THRESHOLDS AND BORROWING LIMITS

Article 8.- Debt safety thresholds

1. Based on the national debt level, the public sector's debt status and international practice, the Finance Ministry shall elaborate and propose to the Prime Minister for decision safety thresholds for foreign debt indicators in each period, ensuring the sustainability of national foreign debts.

2. Safety thresholds of national foreign debts for the 2007-2010 period are specified in Appendix I to this Regulation.

Article 9.- Limits of foreign commercial loans

1. Based on the socio-economic development strategy for each period, the demand for capital to be mobilized for the economy and the present status of national debts, aiming to attain a safe debt level according to safety thresholds of foreign debts defined in Article 8 of this Regulation, the Finance Ministry shall annually assume the prime responsibility for, and coordinate with the Planning and Investment Ministry and the State Bank of Vietnam in, synthesizing, formulating and submitting to the Prime Minister for approval total limits of national foreign commercial loans as part of annual plans on borrowing and repayment of foreign loans, including:

a/ Limit of short-term commercial loans of the whole economy;

b/ Limit of annual medium- and long-term commercial loans of the Government;

c/ Limit of annual commercial loans of enterprises of the public sector;

d/ Projected level of foreign loans of the private sector.

2. Limits shall be formulated on the following principles:

a/ Limit of short-term commercial loans of the whole economy: The State Bank of Vietnam shall assume the prime responsibility for formulating and proposing this limit to the Finance Ministry for synthesis and submission to the Prime Minister. The formulation of this limit is based on the state foreign reserve status, the total supplied money volume (M2), the foreign-currency capital proportion in total M2, which can be withdrawn from the economy upon occurrence of a financial or monetary crisis, and the probability of occurrence of such a financial or monetary crisis, leading to the capital withdrawal by investors and (or) creditors;

b/ Limit of annual medium- and long-term commercial loans of the Government: The Finance Ministry shall assume the prime responsibility for formulating this limit. This limit is determined on the basis of ensuring the debt safety threshold and taking into account the following elements: growth rate in a plan year; average interest rate of commercial loans; the Government's demand for commercial loans for investment in the public sector; and the state budget's capability to pay debts;

c/ Limit of annual commercial loans of enterprises of the public sector: The State Bank of Vietnam shall assume the prime responsibility for, and coordinate with the Finance Ministry in, formulating this limit before incorporation by the Finance Ministry in annual plans on borrowing and repayment of foreign loans. This limit is annually formulated on the basis of the public sector's debt safety threshold and domestic debt status, and enterprises' demand for and capability to directly borrow commercial loans (with or without government guarantees);

d/ Projected level of foreign loans of the private sector: Foreign loans within this level include short-term and medium/long-term loans of enterprises of the private sector. The State Bank of Vietnam shall assume the prime responsibility for projecting and proposing this level to the Finance Ministry for incorporation in the national foreign debt limits.

Chapter IV

DIVISION OF RESPONSIBILITIES AMONG AGENCIES FOR ASSESSMENT AND SUPERVISION OF FOREIGN DEBTS

Article 10.- Responsibilities of the Finance Ministry

1. To specifically guide the methods of calculating foreign debt indicators as defined in Articles 5 and 6 of this Regulation.

2. To collect and synthesize data and information from various sources; to report annually to the Government and the National Assembly on the situation of foreign debts according to foreign debt indicators.

3. To assume the prime responsibility for, and coordinate with the Planning and Investment Ministry, the State Bank of Vietnam and other concerned agencies in, formulating and proposing to the Prime Minister for promulgation the safety thresholds of foreign debts in each period which shall be incorporated in debt strategies and medium-term debt management programs.

4. To annually analyze the list of national debts and the list of government debts according to the foreign debt indicators; and to compare them with the safety thresholds of foreign debts promulgated by the Prime Minister, and report them to the Government in the first quarter of the subsequent year.

5. To biennually analyze the sustainability of debts; to propose measures to adjust policies on medium- and long-term foreign borrowings, thus ensuring the debt safety, and report them to the Government before the end of June of the subsequent year.

6. To annually assume the prime responsibility for, and coordinate with the State Bank of Vietnam and the Planning and Investment Ministry in, formulating, synthesizing and submitting to the Prime Minister for approval and administration limits of foreign commercial loans defined in Article 9 of this Regulation, ensuring the debt safety; to supply relevant information to the State Bank of Vietnam for formulation of limits of commercial loans specified at Point c, Clause 2, Article 9 of this Regulation.

7. To assume, on an annual basis or upon occurrence of an unexpected fluctuation in the foreign debt status, the prime responsibility for, and coordinate with the Planning and Investment Ministry and the concerned agencies in, proposing necessary measures to adjust the borrowing policy and the list of foreign debts; to keep debt indicators within safety limits; to minimize risks and costs for the state budget and the whole economy.

8. To coordinate with the State Bank of Vietnam and other concerned agencies in conducting periodical or extraordinary investigations, when necessary, into the foreign debt status of enterprises.

9. To supply to the concerned agencies (the Planning and Investment Ministry, the Government Office and the State Bank of Vietnam) foreign debt indicators after they are approved by the Prime Minister.

10. To make public general foreign debt indicators according to the regulation on information supply.

Article 11.- Responsibilities of the State Bank of Vietnam

1. To periodically supply to the Finance Ministry figures and information with contents and in a frequency specified in Appendix II to this Regulation.

2. To assume the prime responsibility for formulating and submitting to the Prime Minister (through the Finance Ministry) for approval limits of short-term loans of the whole economy; and limits of foreign commercial loans of enterprises of the public sector as defined at Points a and c, Clause 2, Article 9 of this Regulation.

3. To assume the prime responsibility for, and coordinate with the Finance Ministry in, administering the limit of annual foreign commercial loans of enterprises and organizations already approved by the Prime Minister.

4. To conduct constant and regular supervision of enterprises' foreign borrowing activities on the basis of reports from the system of commercial banks and the system of its branches in provinces and centrally run cities.

5. To biannually assess debt indicators of enterprises according to the provisions of Article 7 of this Regulation, then notify them to the Finance Ministry for subsequent reporting to the Prime Minister.

6. To guide its attached units and commercial banks in reporting and supplying information in service of debt assessment and supervision under this Regulation.

7. To assume the prime responsibility for, and coordinate with the Finance Ministry and other concerned agencies in, conducting periodical or extraordinary investigations, when necessary, into the foreign debt status of enterprises.

Article 12.- Responsibilities of the Planning and Investment Ministry

1. To periodically supply to the Finance Ministry relevant figures and information with contents and in a frequency specified in Appendix III to this Regulation.

2. To coordinate with the Finance Ministry in studying, formulating and submitting the debt safety thresholds to the Prime Minister for promulgation in each period.

3. To coordinate with the State Bank of Vietnam and the Finance Ministry in regularly and constantly supervising the borrowing and use of foreign loans by all subjects involved in those activities.

Article 13.- Responsibilities of other concerned agencies

1. The Planning and Investment Ministry, the General Office of Statistics, the Trade Ministry and other concerned agencies shall coordinate with one another in periodically supplying information and figures to the Finance Ministry as specified in Appendix II to this Regulation, or other information and figures as requested by the Finance Ministry to satisfy requirements of the analysis and assessment of the foreign debt status.

2. Information and figures must be supplied in a sufficient, accurate and timely manner and according to competence. Information-supplying agencies are answerable to the Prime Minister for the contents of information and figures supplied to the agency responsible for debt assessment and supervision.

Article 14.- Responsibilities of enterprises and economic organizations

1. Enterprises and economic organizations that borrow foreign loans shall comply with the provisions of the Regulation on management of foreign loans and payment of foreign debts of the Government, regulations on registration of loans; observe the regime of reporting on foreign debts to the State Bank of Vietnam according to the current regulations; take initiative in organizing the management of debts and control of risks; contribute to stabilizing the common economy; and create conditions for agencies in charge of debt management to inquire into information on and actual situation of debts of enterprises when necessary.

2. Commercial banks shall report and supply information to the State Bank of Vietnam and the Finance Ministry according to this Regulation and other current provisions of law.

3. Enterprises and economic organizations shall be held responsible before law for the information and figures supplied to concerned agencies for assessment and supervision of foreign debts.

Article 15.- Implementation provisions

Ministers, heads of ministerial-level agencies, heads of government-attached agencies, and presidents of provincial/municipal People's Committees shall organize the implementation of this Regulation and promptly report problems (if any) to the Finance Ministry for subsequent reporting to the Prime Minister for decision on appropriate supplements and amendments.

APPENDIX I

SAFETY THRESHOLDS OF NATIONAL FOREIGN DEBTS FOR THE 2007-2010 PERIOD
(Promulgated together with the Prime Minister’s Decision No. 231/2006/QD-TTg of October 16, 2006)

APPENDIX II

LIST OF INDICES SUPPLIED BY THE STATE BANK OF VIETNAM TO THE FINANCE MINISTRY
(Promulgated together with the Prime Minister’s Decision No. 231/2006/QD-TTg of October 16, 2006)

APPENDIX III

LIST OF INDICES SUPPLIED BY MINISTRIES OR MINISTERIAL-LEVEL AGENCIES TO THE FINANCE MINISTRY
(Promulgated together with the Prime Minister’s Decision No. 231/2006/QD-TTg of October 16, 2006)