Decision No. 544/QD-TTg dated April 20, 2017 of the Prime Minister on approval for the medium-term debt management program in 2016 – 2018 period

THE PRIME MINISTER

Decision No. 544/QD-TTg dated April 20, 2017 of the Prime Minister on approval for the medium-term debt management program in 2016 – 2018 period

Pursuant to the Law on the Organization of the Government dated June 19, 2015;

Pursuant to the Law on public debt management dated June 17, 2009;

Pursuant to the Resolution No. 25/2016/QH14 dated November 09, 2016 of the National Assembly on the national 5-year financial plan in 2016-2020 period;

Pursuant to the Government’s Decree No. 79/2010/ND-CP dated July 14, 2010 on public debt management operations;

Pursuant to Decision No. 958/QD-TTg dated July 27, 2012 of the Prime Minister giving approval for the Strategy for public debts and foreign debts of the country in 2011-2020 period and the vision by 2030;

Pursuant to the Government’s Decree No. 215/2013/ND-CP dated December 23, 2013 defining the functions, tasks, powers and organizational structure of Ministry of Finance;

At the request of Minister of Planning and Investment,

DECIDES:

Article 1.The medium-term debt management program in 2016 – 2018 period is approved herein with the following principal contents:

1. Name of the Program: The medium-term debt management program in 2016 – 2018 period.

2. Program management agency and coordinating agencies:

a) Program management agency: Ministry of Finance.

b) Coordinating agencies: Ministries, regulatory bodies and local governments.

3. Scope of management:

a) Loan instruments and agreements shall be issued and signed by the Government in accordance with regulations of the Law on public debt management.

b) Government-backed loans provided to two banks for social policies (The Vietnam Development Bank and Vietnam Bank for Social Policies) for issuing bonds, and those provided to domestic and foreign enterprises shall be performed in accordance with regulations of the Law on public debt management.

c) Loans raised by provincial-level governments shall be managed in accordance with regulations of the law on state budget.

d) Foreign debts incurred by enterprises or credit institutions shall be treated as conventional loans.

4. Program’s objectives:

a) General objectives:

Mobilize capital with appropriate costs and level of risks and satisfy the requirements for balancing the state budget and social – economic development in each period; allocate and use loan capital for proper purposes and guarantee the solvency; keep the indices of public debts, government debts and foreign debts of the country within the safe limit; and ensure the national financial security in conformity with the reality of Vietnam and international practices.

b) Specific objectives:

- Gradually reduce domestic and foreign loans taken to make up state budget deficits. The state budget deficit is expected to be reduced to 5.4% of GDP in 2016; the central-government budget deficit is expected to be reduced to approximately 3.38% of GDP in 2017 and 3.3% of GDP in 2018.

- Significantly cut down on government-backed loans by minimizing the provision of government guarantee to new applicants; control the issuance of government-backed bonds by two banks for social policies at the limit of not exceeding the annual debt repayment amount; control the annual net disbursement granted to in-progress programs/projects at 1,000 USD/year.

- Minimize risks of refinancing, liquidation, exchange rate, and currency, set up the mechanism to boost the development of government bond market and strive for extension of loan term by issuing domestic government bonds for the period 2016-2018; the expected average loan term is expected to hit 6 – 8 years, and the rate of bonds issued with a term of 5 years or longer is expected to reach at least 70% of total volume of issued government bonds.

- Maintain public debts (including government debts, government-guaranteed debts and local government debts) less than 65% of GDP, in which the outstanding government debt is less than 54% of GDP and the outstanding foreign debt of the whole country is less than 50% of GDP.

- Maintain total amount of debts payable by the Government in the year (excluding on-lend amount) less than 25% of total state budget revenues, and total amount of national foreign debts payable in the year less than 25% of the value of exported goods and services.

- Maintain the annual ratio of the national foreign exchange reserves to total amount of outstanding short-term foreign debts of the country more than 200%.

5. Capital mobilization and debt repayment

a) Mobilization of Government loans:

- The Government loans mobilized to offset the state budget deficit is approximately VND 606.4 trillion, including VND 247.2 trillion in 2016, VND 172.3 trillion in 2017 and VND 186.9 trillion in 2018.

- Total amount of loans for repayment of principals to the central-government state budget are approximately VND 414.4 trillion, including VND 132.4 trillion in 2016, VND 144 trillion in 2017 and VND 138 trillion in 2018. New loans used for repaying annual principals shall be decided by the National Assembly as reported by the Government and stated in the Resolution on annual state budget estimates on the basis of aggregating and balancing sources of revenues, expenditures and budget surplus, and maintaining the government debts and public debts within the limits as prescribed in Resolutions of the National Assembly.

- Total amount of the Government foreign loans for on-lending is about VND 118.4 trillion, including VND 32 trillion in 2016, VND 42.4 trillion in 2017 and VND 44 trillion in 2018.

b) Government guarantee:

In implementation of the Resolution No. 25/2016/QH14 dated November 09, 2016 of the National Assembly on the national 5-year financial plan in the 2016 - 2020 period, the Government guarantee shall be significantly cut down. To be specific:

- Control the government guarantee limits provided to the Vietnam Development Bank and Vietnam Bank for Social Policies for issuing bonds not exceeding annual amount of principals payable for stabilizing the outstanding debts;

- With regard to foreign loans which are guaranteed by the Government and in course of disbursement, control the net amount disbursed not exceeding USD 01 billion per year;

- Suspend the provision of Government guarantee to all applicants for new domestic and foreign loans; review the list of programs and projects eligible for government guarantee in order to determine the government guarantee limit during 2016 – 2020 and that in each year and ensure the debt safety ratio within the limits approved by the National Assembly.

c) Local government debts: control the local-government budget deficit and debts of local governments in accordance with regulations of the Law on state budget in 2015. The local-government budget deficit is about VND 6,000 billion in 2017 and about VND 11,100 billion in 2018.

d) Foreign commercial loans (net borrowing) of enterprises and credit institutions under the form of conventional loans shall not exceed USD 5.5 billion per year. The outstanding amount of national short-term foreign debts shall be strictly controlled with the growth rate of not exceeding 8-10% per year.

dd) Debt repayment:

- Actively allocate funding to fulfill the repayment liabilities for government debts in order to avoid the occurrence of overdue debts which cause adverse impacts on international commitments of the Government;

- Enterprises and credit institutions are obliged to use loan capital in proper manner, shall not use funding from short-term loans to invest in medium-term or long-term programs or projects, and shall themselves bear risks and assume responsibility before the law for the mobilization, use of loan capital, and debt repayment.

6. Essential solutions and tasks

a) Control debt ratios within the prescribed limits:

- Develop the action program for implementation of the Resolution No. 07/NQ-TW of the Central Committee of the Communist Party of Vietnam for gradually restructuring the state budget and managing public debts in the overall economic restructuring context and in association with innovation of growth models, ensuring the efficiency, comprehensiveness, impartiality and sustainability, and appropriately encouraging resources; only budgeting appropriate expenditures and receiving loans within the solvency.

- Strictly control new loans from the step of giving approval for proposals, and minimize loans associated with direct contracting or purchase of equipment without ensuring quality, especially equipment which fails to satisfy environmental protection standards. When applying for new loans, the assessment of impacts of such loans on the scale of public debts and the solvency in the medium term is duly conducted.

- Manage the disbursement of funding from ODA loans or concessional loans within the limits prescribed in the medium-term public investment plan and annual state budget estimates approved by competent authorities.

- Ensure the balancing and allocation of enough funding for repaying both principals and interests of Government debts in full and on schedule, minimize and reduce the refinancing; allocate enough funding for debt repayment for reducing outstanding government debts and outstanding public debts.

- Strictly manage local-government budget deficits and local government debts. Follow the macroeconomic developments, GDP growth, changes in exchange rate and conditions for mobilizing domestic and foreign borrowed capital, etc. to take initiative in formulating and submitting plans for adjusting limits of public loans and corresponding debts to competent authorities.

b) Improve the efficient use of public loans

- Tighten up rules and disciplines on finance and state budget, and improve the openness, explicitness and accountability of governments at all levels for budget revenues and expenditures, the use of borrowed capital and repaying public debts. Narrow the range of entities eligible for using public debts, only giving priority to key and potential programs/ projects in public investment field or loans used to solve urgent matters in the field of public finance with the aim of stabilizing the financial year.

- Make change in structure of ODA loans and concessional loans from allocated grants to on-lend grants with the aims of sharing risks and relieving burden of debt repayment on state budget. Continue studying and formulating the mechanism for sharing credit risks between the government, credit institutions providing on-lending services, enterprises and local governments; regulations on on-lend interests and guarantee fees which fully reflect credit risks; level of risk provisions of state budget.

- Intensify the supervision of utilization of loan capital to ensure the investment efficiency, quality of construction works and compliance with regulations of law.

- Minimize the increase of total investment by funding from loans; improve the awareness of public debts; take initiative in preventing and strictly handling acts of misconduct or corruption.

c) Continue the restructuring of public debts:

- Promote the mobilization of domestic funding sources to meet the government borrowing demand with the aims of reducing exchange rate risks, gradually reducing and evenly terminating the mobilization of ODA loans in the future.

- Formulate the mechanism for mobilizing loan capital on the market to set up the foundation for movement from the mobilization of ODA loans and concessional loans to loans according to market conditions upon the graduation from IDA.

- Formulate the plan for balancing sources of funding for paying debts increased in the period when Vietnam has officially graduated from IDA.

- Continue studying and settling large debts, and review and evaluate on-lend loans and government-guaranteed loans that face difficulties in debt repayment in order to formulate the plan for restructuring of these debts in course of state budget management.

d) Promote the development of domestic capital market: continue promoting the in-width and in-depth development of domestic capital market and government bond market towards diversification of debt instruments and investor types, give priority to long-term investors and attract foreign investors to make investments in domestic capital market and government bond market.

dd) Minimize the provision of government guarantee to new loans:

- Change the government guarantee mechanism by narrowing the range of entities eligible for government guarantee and giving priority to national important projects whose investment proposals are decided by the National Assembly.

- Narrow the range of entities of preferential credit programs and consider providing government guarantee to loans raised by issuing domestic bonds.

e) Intensify the management of local government debts with the aims of meeting funding demand for local investment and development, improving the efficiency of loans and ensuring safety of local government debts and public debts.

Article 2.Implementation organization

1. Ministry of Finance shall:

a) Act as the Program management agency, take charge and cooperate with ministries, relevant authorities, and people’s committees of central-affiliated cities or provinces to organize the implementation of this Program in effective manner.

b) Study and propose the Government to promulgate Decrees providing guidance for implementing the amended Law on public debt management.

c) Take charge and cooperate with relevant authorities to develop the Scheme for establishment of national public debt database.

d) Review the list of programs and projects eligible for government guarantee, and set up limits of government guarantee during 2016 – 2020.

dd) Formulate the mechanism for mobilizing loan capital on the market to set up the foundation for movement from the mobilization of ODA loans and concessional loans to loans according to market conditions upon the graduation from IDA.

e) Formulate the plan for balancing sources of funding for paying debts increased in the period when Vietnam has officially graduated from IDA.

2. Ministry of Planning and Investment shall take charge and cooperate with ministries, regulatory bodies, local governments and relevant agencies to consolidate and arrange the disbursement of foreign loans to specific programs and projects in 2016-2018 period in conformity with the medium-term public investment plan approved by the National Assembly.

3. Ministries, ministerial-level agencies and the Government s affiliates shall, within the ambit of their assigned duties and powers, perform state management function, monitor, inspect, report and provide information about public debts and national foreign debts as regulated to ensure the full and timely repayment of debts.

4. The people’s committee of provinces or central-affiliated cities shall assume responsibility to manage local government debts, and provide sufficient and accurate data thereof within the provincial-level government competence as regulated.

5. Funding for implementing the Program:

a) Funding for implementing the Program is covered by funding from state budget and concessional loans granted by foreign sponsors, and usable amount of on-lending fees and government guarantee fees at Ministry of Finance during 2016-2020 as regulated in Decision No. 05/2016/QD-TTg dated February 05, 2016 by the Prime Minister.

b) Ministry of Finance shall take charge and cooperate with relevant agencies to aggregate necessary expenditures in the annual state budget estimates for implementing the Program.

Article 3.This Decision takes effect on the signing date.

Article 4.Ministers, heads of ministerial-level agencies, heads of the Government’s affiliates, and Chairpersons of people’s committees of central-affiliated cities or provinces shall implement this Decision.

The Prime Minister

Nguyen Xuan Phuc