Decision 460/QD-TTg 2022 approving the Public Debt Strategy toward 2030

DECISION

Approving the Strategy on public debts through 2030^[1]

THE PRIME MINISTER

Pursuant to the June 19, 2015 Law on Organization of the Government; and the November 22, 2019 Law Amending and Supplementing a Number of Articles of the Law on Organization of the Government and the Law on Organization of Local Administration;

Pursuant to the November 23, 2017 Law on Public Debt Management;

Pursuant to the Government’s Decree No. 87/2017/ND-CP of July 26, 2017, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;

At the proposal of the Minister of Finance in Report No. 36/TTr-BTC of February 28, 2021;

DECIDES:

Article 1. To approve the Strategy on public debts through 2030 with the following principle contents:

1. Viewpoints

The formulation and implementation of the Strategy on public debts for the 2021-2030 period (below referred to as the Strategy) are associated with the following six major viewpoints:

a/ To stick to and concretize the viewpoints, objectives and key tasks set out in the Party Central Committee’s Political Bureau’s Resolution No. 07-NQ/TW of November 18, 2016, on guidelines on and solutions to restructure the state budget and manage public debts to ensure national financial safety and sustainability and the 13^th National Party Congress’s documents and resolutions. Public debt management must always ensure utmost interests of the nation and people; expenditures must only be made within the economy’s capacity and borrowings must be kept within debt repayment capacity and ensure the national financial security. In the new situation with a lot of difficulties and challenges, public debts continue to be an impetus for socio-economic development and create a driving force for sustainable growth. In the course of borrowing capital,  to continue adhering to the principle that domestic borrowing sources, which are crucial and decisive, will be closely and efficiently associated with foreign borrowing sources, which are considered important.

b/ To enhance finance, state budget and public debt management according to medium-term plans to ensure the consistency and uniformity of financial plans with public investment plans and public debt borrowing and repayment plans. The source of  public debts should be used mainly to offset state budget deficit in service of socio-economic development while capital should be borrowed based on demand.

  c/ It is the task of all sectors, authorities and capital-using units to strictly manage public debts; to raise effectiveness in mobilization, allocation and use of borrowed capital and ensure the key role of the central budget and proactive role of local budgets.

d/ The raising of capital must be conducted with debt repayment capacity of each budget level and each borrower taken into careful consideration. To arrange funds for full and timely repayment of debts so as to prevent overdue debts that affect the Government’s commitments and sovereign credit rating.

dd/ To develop capital mobilization channels together with restructuring debt portfolios to increase sustainability.

e/ To promote digital transformation in public debt management; to ensure publicity and transparency and accountability of all authorities regarding the use of borrowed capital and repayment of public debts.

2. Overall objectives

To mobilize borrowed capital to meet the state budget’s demands in each period with borrowing costs which are rational and appropriate to the degree of risk of the loans, ensuring debt repayment capacity; to maintain public debt and government debt safety indicators and keep foreign debts under control to ensure national financial security; to boost the development of the domestic capital market in association with objectives and tasks of the 2021-2030 ten-year socio-economic development strategy.

3. Specific objectives

a/ For the 2021-2025 period

- To control the state budget deficit target approved by the National Assembly in the state budget estimates and 2021-2025 five-year national financial plan, ensuring that public debt safety indicators, including debt ceiling and warning thresholds, are kept within the National Assembly-approved limits.

b/ Targets up to 2030

- Public debts and government debts must not exceed 60% and 50% of GDP, respectively.

- The Government’s direct debt repayment obligation must not exceed 25% of the total state budget revenue.

- The nation’s foreign debts must not exceed 45% of GDP.

4. Orientations for the mobilization and use of borrowed capital

a/ To regularly evaluate impacts of capital borrowing on outstanding public debts and government debts and debt repayment obligations. In the administration of the annual state budget, to concurrently control the ratio of state budget deficit and debts directly paid by the budget within the allowable limits.

b/ To frequently issue government bonds with standard bond terms, focusing on bonds of 5 years or longer and concurrently issue bonds with flexible terms of under 5 years and issue foreign-currency bonds in the domestic market to meet capital mobilization demands and achieve the objective of developing the government bond market. To issue international bonds to offset the central budget deficit for development investment or restructure government debts when market conditions become favorable.

c/ To focus on disbursing ODA loans and foreign concessional loans already signed to the end of 2020. To mobilize borrowed capital from foreign sources focusedly for a number of key fields so as to bring into full play the scale-based economic efficiency; to prioritize investment in projects directly promoting growth associated with sustainable development and having spillover effects such as those on adaptation to climate change, improvement of environmental quality, education, healthcare, and technology. To formulate a number of public investment programs to implement a number of important key projects and works that have great impetus and spillover effects and can settle issues concerning national and regional development and regional connectivity on the basis of priority objectives, instead of making scattered investment in separate projects; to increase the rate of foreign borrowing to support the budget in raising its proactive management of the use of borrowed capital.

d/ To administer local administration debts within the local budget deficit limit approved by the National Assembly and outstanding loan limit prescribed by the Law on the State Budget.

dd/ To strictly control provisional debt obligations and ensure funding sources for repayment of government-guaranteed debts; to manage guarantee and security amounts, ensuring compliance with regulations, effectiveness and the set guarantee limits, prioritizing funding sources for provision of guarantee for national key programs and projects that have obtained the National Assembly’s or Government’s approval of investment policy or the Prime Minister’s investment approval. To keep government-guaranteed debt growth rate not exceeding the previous year’s GDP growth rate. To select a number of infrastructure development works that have spillover effects and are capable of generating income sources for debt repayment so that the Government can on-lend ODA loans and foreign concessional loans.

e/ To strictly control enterprises’ and credit institutions’ foreign debts borrowed by the mode of self-borrowing and self-repayment so as to keep the national foreign debt target within the permissible limit. To renew the mode of management of the national foreign debt to suit the nature of short-, medium- and long-term borrowing and the nature and degree of risks of each group of borrowers. To study and improve institutions for applying measures to control capital flows in the management of foreign debts borrowed by the mode of self-borrowing and self-repayment in line with international practices.

  5. Tasks and implementation solutions

  a/ Improving institutions, policies and debt management instruments

The improvement of the system of institutions, policies and debt management instruments shall be carried out in two periods, specifically as follows:

- The 2021-2025 period:

+ To continue reviewing laws and decrees, proposing amendments and supplementations to improve regulations on institutions, functions and tasks of the Government, Prime Minister, Ministry of Finance, Ministry of Planning and Investment, State Bank of Vietnam and local administration to ensure their consistency with the 2017 Law on Public Debt Management. To study and propose solutions to unify the function of managing public debts and public investment in the overall state budget to improve the efficiency.

+ To effectively implement debt instruments (5-year borrowing and debt repayment strategies and plans, 3-year public debt management programs, and annual borrowing and debt repayment plans) to serve the performance of operations related to the mobilization and use of borrowed capital for development investment in each period.

+ To review and evaluate the implementation of the 2017 Law on Public Debt Management, report to the Government for supplementation, amendment and improvement of regulations to effectively implement the Law on Public Debt Management, add sanctions to raise the guaranteed subjects’ debt repayment responsibility, refraining from turning enterprises’ debt repayment obligations into the State’s ones; to study supplementing regulations on the framework of management of government debt portfolio’s risks  in conformity with international practices.

+ To study, summarize and evaluate the implementation of the private sector’s foreign debt limits, report to the Government proposals to amend and supplement or report to the National Assembly amendments to provisions on supervision and management of enterprises’ and credit institutions’ foreign debts borrowed by the mode of self-borrowing and self-repayment suitable with the country’s development conditions and the nature of lending sources and borrowers.

- The 2026-2030 period:

+ To review and evaluate the 2017 Law on Public Debt Management and report to the Government supplementations and amendments to the Law on Public Debt Management for submission to the National Assembly so as to improve institutions to effectively carry out debt management in line with international practices.

  + On the basis of reviewing and evaluating regulations on the method of managing enterprises’ and credit institutions’ foreign debts borrowed by the mode of self-borrowing and self-repayment by limits and competent authorities’ policy to permit the separation of the management of foreign debts borrowed by the mode of self-borrowing and self-repayment from foreign debts of the public sector, the State Bank of Vietnam shall coordinate with ministries and sectors in studying and reporting to competent authorities for adjustment or promulgation regulations on implementation of policies to manage foreign debts borrowed by the mode of self-borrowing and self-repayment so as to control the capital flows according to the target set out for the 2026-2030 period.

+ The State Bank of Vietnam shall propose the Government to improve the legal framework and organizational model of financial stability to implement the macroprudential policy.

b/ Implementing modern debt management instruments and measures

- To take the initiative in flexibly combining debt instruments and capital mobilization channels at home and abroad based on market conditions to ensure achievement of risk management targets set for the government debt portfolio.

- To use the government debt management instruments in line with practical requirements and in association with management of the state budget and state cash fund to ensure efficiency, safety and liquidity of the state budget.

- To continue issuing government bonds associated with restructuring public debts and government debts toward focusing on the issuance of government bonds with terms of at least 5 years when the market becomes favorable in order to mobilize capital for the state budget and at the same time extend the average term of the government bond debt portfolio.

- Based on positive market conditions, to perform debt restructuring operations (debt redemption, swap, derivative instruments and other operations) at reasonable costs to restructure the Government’s domestic debt and foreign debt portfolios in a safe and sustainable manner, contributing to extending principal payment obligations over years and reduce pressure on the state budget’s liquidity.

-  Regarding the Government’s debt direct repayment pressure, which will sharply increase in medium and long terms, to consider adjusting mechanisms and policies to arrange part of the state budget to repay the principal amounts to reduce debt burdens. For loans and debt instruments to be mobilized in the coming time, it is necessary to consider so as to ensure even repayment schedule and prevent the concentration of debt repayment obligations in certain years.

- To study international practices, then strive to apply the method of making statistics of foreign debts of the public sector based on the places of residence of creditors in order to be more consistent with international standards; to concurrently monitor foreign debt indicators in foreign currencies to manage exchange rate risks. To make separate reports on the public sector’s foreign debts (government debts, government-guaranteed debts) and enterprises’ and credit institutions’ debts borrowed by the mode of self-borrowing and self-repayment.

- To apply measures to intensify the control of capital flows together with the control of net withdrawal limits, specifically as follows:

+ To study and submit to competent authorities for permission for application complementary measures to manage enterprises’ and credit institutions’ foreign debts borrowed by the mode of self-borrowing and self-repayment in order to strictly control short-, medium- and long-term foreign borrowing; to impose foreign borrowing limits on each group of enterprises; to request the implementation of measures for preventing risks regarding foreign loans in foreign currencies; to improve reporting mechanisms and sanctions suitable with measures to control short-, medium- and long-term borrowing; to control credit institutions’ borrowing through prudential ratios, etc.

+ To study and submit to competent authorities the possibility of application of supervisory measures through safety indicators together with adjusting the legal framework on management of foreign debts borrowed by the mode of self-borrowing and self-repayment in the direction of not applying the ceiling level of enterprises’ and credit institutions’ debts borrowed by the mode of self-borrowing and self-repayment.

c/ Efficiently raising, managing and using debts

- Lending sources for development investment shall be strictly controlled in terms of targets, investment efficiency, debt repayment plans and impacts of the total borrowed capital on public debts, government debts and debt repayment obligations.

- To report to the National Assembly and Government for consideration and approval a number of public investment programs to implement a number of important key projects and works that have great impetus and spillover effects and can settle issues  concerning national and regional development and regional connectivity, etc. Based on market conditions and capability to mobilize capital from development partners, to take the initiative in flexibly selecting appropriate lending sources and arrange sufficient capital for completion in the 2021-2025 and 2026-2030 periods.

- To study and propose solutions to mobilize resources in domestic and international capital markets for implementing socio-economic recovery and development programs.

- To strengthen the management of fiscal risks of central and local budgets arising from loans to be on-lent, associating local administrations’  right to make borrowing decisions with their debt repayment liability and associating public non-business units’ on-lent loan repayment liability with their degree of autonomy.

d/ Further promoting publicity and transparency of the mobilization, management and use of public debts, improving sovereign credit rating

- To formulate and submit to the Prime Minister for approval, and implement, the Scheme on orientations to improve sovereign credit rating by 2030.

- To formulate and implement a strategy on contact and maintenance of relations with domestic and international capital markets.

- To review and systematize reporting regimes and improve periodical disclosure of information on national public debts and foreign debts, including online channels.

dd/ Developing financial market and domestic capital market

  - To diversify terms of issuance, including also terms of less than 5 years, so as to keep the average term of issuance within the limit permitted by the National Assembly and concurrently meet investors’ demands, contributing to forming a benchmark yield curve with full reference terms for debt instruments as well as other economic sectors.

- To develop a diversified system of investors in the government bond market with  priority given to the development of long-term investors such as investment funds, the system of voluntary supplementary retirement funds; to attract foreign investors to make  long-term investment in the market. To renovate Vietnam Social Security’s investment mechanisms according to Resolution No. 28-NQ/TW of May 23, 2018, of the Party Central Committee of the 12^th Congress, on reforming social insurance policies.

- To develop diversified products and goods in the market to meet investors’ demands; to develop green government bonds to mobilize capital for environmental protection projects serving sustainable economic development. To study the inclusion of government bonds in the international bond indices to attract more investment funds and foreign professional investors.

e/ Regarding provisional debt obligations

To strictly control provisional debt obligations of the state budget arising from provision of government guarantee and on-lending of foreign loans. To study and propose additional regulations on risk provisions in the state budget for debt obligations arising from public-private partnership projects and provision of government guarantee.

g/ Organizing the apparatus and applying information technology

To improve organizational apparatuses, improving the quality of the contingent of cadres in charge of public debt management; to renovate public debt management methods by applying information technology and implementing digital transformation, approaching the international advanced debt management model.

To focus on establishing a professional and modern public debt management agency in accordance with international practices and instructions stated in the Party Central Committee’s Political Bureau’s Resolution No. 07-NQ/TW of November 18, 2016; to improve the qualifications of public employees in charge of debt management; to consolidate and accelerate the application of information technology in the control and disbursement of capital borrowed from foreign sources; to modernize physical facilities in service of debt management; to build a database on and make statistics of debts. To ensure funding extracted from on-lending and government guarantee charges to perform public debt management tasks specified in the 2017 Law on Public Debt Management.

To perform uniform management of local administration debts, and clearly define the functions, tasks, powers and responsibilities of local government agencies in the management of local administration debts to ensure transparency and efficiency; to strengthen the capacity of cadres in charge of managing local administration debts to serve the monitoring, assessment and management of risks; to build and link the system of information on local administration debts to ensure the updating and serve the management based on outstanding debt limits and annual local budget deficit; to use instruments for analyzing and evaluating local administration debt portfolio and structure to apply risk prevention instruments and ensure the sustainability of local administration debts.

h/ Carrying out inspection, examination and supervision

To intensify the inspection, examination and supervision of the observance of the law on management and use of borrowed capital of the public sector. To strengthen the effect and effectiveness of the system of internal supervision, risk control framework and internal audit activities.

To promote the decentralization and delegation of powers and raise local administration’s responsibility in public debt management; to educate and raise the sense of responsibility of the heads. To personalize responsibility together with intensification of inspection and supervision. To tighten order and discipline; to reward and discipline in a timely and strict manner.

6. Organization of implementation

a/ Phases of the Strategy implementation

The Strategy shall be carried out in two phases, specifically as follows:

- The first phase: To implement the 2021-2025 five-year national financial plan and borrowing and public debt repayment plan according to the National Assembly’s resolutions; to formulate and implement overlapping 3-year public debt management programs and annual borrowing and public debt repayment plans;

- The second phase: To formulate and implement the 2026-2030 five-year national financial plan and borrowing and public debt repayment plan; overlapping 3-year public debt management programs and annual borrowing and public debt repayment plans.

b/ Resources for implementation of the Strategy

Funds for the formulation and implementation of the contents of the Strategy shall be allocated from the state budget and other lawful funding sources in accordance with law.

Article 2. Responsibilities for organization and implementation of the Strategy

1. The Ministry of Finance shall:

- Assume the prime responsibility for, and coordinate with ministries, ministerial-level and government-attached agencies and provincial-level People’s Committees in, organizing the implementation of the Strategy; and direct the implementation of the Strategy’s contents in each phase.

- Improve debt management institutions, policies and instruments; take the initiative in flexibly combining debt instruments and capital mobilization channels at home and abroad depending on market conditions, perform debt restructuring operations at reasonable costs to ensure achievement of risk management targets for the government debt portfolio; conduct mobilization, allocation and use of borrowed capital and debt repayment of the Government, manage the grant of government guarantee, and guide and monitor local administration’s borrowing and debt repayment.

- Assume the prime responsibility for, and coordinate with related agencies in, conducting macro-monitoring of public debts, and coordinate with agencies in conducting periodical and extraordinary inspection of the mobilization, allocation and use of borrowed capital and public debt repayment.

- Assume the prime responsibility for, and coordinate with related ministries, sectors and localities in, inspecting the implementation of the Strategy; every 5 years, preliminarily review, evaluate and draw lessons from the implementation of the Strategy; assume the prime responsibility for, and coordinate with agencies in, proposing and submitting to the Prime Minister for decision adjustment of the Strategy’s objectives and contents in case of necessity.

- In the course of implementing the 2021-2025 national financial plan and borrowing and public debt repayment plan, if great fluctuations or risks occur, promptly report them to the Government for submission to the National Assembly for consideration and decision.

2. The Ministry of Planning and Investment shall:

- Formulate public investment programs to implement a number of important key projects and works that have great impetus and spillover effects and can settle issues regarding national and regional development and regional connectivity, report to the Government and the National Assembly for consideration and approval.

- Inspect, supervise and evaluate the efficiency of the use of public investment funds, including sources of public debts borrowed for development investment; monitor and control the borrowing and debt repayment of foreign-invested enterprises.

3. The State Bank of Vietnam shall:

- Study, summarize and evaluate the implementation of foreign debt limits in the private sector, report to the Government proposals for supplementing or amending, or report to the National Assembly for amending regulations on supervision and management of enterprises’ and credit institutions’ foreign debts borrowed by the mode of self-borrowing and self-repayment suitable with the country’s development conditions and the nature of lending sources and borrowers.

- Study and submit to competent authorities for approval, and implement a number of complementary measures to manage enterprises’ and credit institutions’ foreign debts borrowed by the mode of self-borrowing and self-repayment in order to strictly control short-, medium- and long-term foreign borrowing.

- Propose the Government to improve the legal framework and organizational model of financial stability to implement the macro-prudential policy. Study and submit to competent authorities for grant of permission for application of supervision measures based on safety indicators together with the adjustment of the legal framework on management of foreign debts borrowed by the mode of self-borrowing and self-repayment based on measures to supervise capital flows instead of imposing a ceiling level to enterprises’ and credit institutions’ debts borrowed by the mode of self-borrowing and self-repayment.

4. Ministries, ministerial-level agencies, government-attached agencies, and provincial-level People’s Committees shall coordinate with the Ministry of Finance and related agencies shall, within the ambit of their functions and state management tasks, direct and take part in the implementation of the Strategy’s relevant contents; organize the efficient use of public loans, arrange sources for adequate and timely debt repayment, bear accountability, and implement the periodical reporting regime under regulations.

Article 3. Effect

This Decision takes effect on the date of its signing. This Decision replaces the Prime Minister’s Decision No. 958/QD-TTg of July 27, 2012, approving the Strategy on public debts and national foreign debts for the 2021-2020 period, with a vision toward 2030.

Article 4. Implementation responsibility

  Ministers, heads of ministerial-level agencies, heads of government-attached agencies and chairpersons of provincial-level People’s Committees shall implement this Decision.-

For the Prime Minister
Deputy Prime Minister
LE MINH KHAI