THE PRIME MINISTER
Decision No. 689/QD-TTg of May 4, 2013, approving the Program on management of medium-term debts during 2013-2015
THE PRIME MINISTER
Pursuant to the December 25, 2001 Law on Organization of the Government;
Pursuant to the June 17, 2009 Law on Public Debt Management;
Pursuant to the National Assembly’s Resolution No. 10/2011/QH13 of November 8, 2011, on the 2011-2015 five-year socio-economic development plan;
Pursuant to the Government’s Decree No. 79/2010/ND-CP of July 14, 2010, on public debt management operations;
Pursuant to the Prime Minister’s Decision No. 958/QD-TTg of July 27, 2012, approving the Strategy on public debts and national foreign debts during 2011-2020 and a vision toward 2030;
Pursuant to the Government’s Decree No. 118/2008/ND-CP of November 27, 2008, defining the functions, tasks, powers and organizational structure of the Ministry of Finance;
At the proposal of the Minister of Finance,
DECIDES:
Article 1. To approve the Program on management of medium-term debts during 2013-2015 with the following principal contents:
1. Program’s name: Program on management of medium-term debts during 2013-2015.
2. Program-managing agency: Ministry of Finance.
3. Coordinating agencies: Other ministries, sectors and localities.
4. Program’s objectives
a/ Overall objectives
To mobilize, and manage the use of, loans with reasonable expenses and risk degree to meet state budget balancing and socio-economic development investment requirements in each period; to allocate and use loans properly and effectively so as to ensure debt payment capacity; to keep indicators of public debts, government debts and national foreign debts at safe levels to ensure national financial security and suitable to Vietnam’s conditions and international practices.
b/ Specific objectives during 2013-2015
- To borrow domestic and foreign loans to offset state budget overspending while gradually reducing state budget overspending (inclusive of government bonds) to below 4.5% of GDP by 2015, starting with 4.8% of GDP in 2013 and around 4.7% in 2014.
- To domestically issue government bonds for the program on investment in transport, irrigation, healthcare and education works during 2011-2015.
- To additionally mobilize loans for implementing the scheme to build a complete infrastructure system for national industrialization and modernization.
- Government guarantees, borrowing of foreign loans and payment of foreign debts by businesses and credit institutions must follow the principle of self-borrowing and self-repayment; local administrations’ loans and debts must be within the annual loan and debt limits approved by competent authorities.
- To intensify risk management and reschedule a number of public debts for reducing market, credit and liquidity risks to keep debt indicators within the safety limits and ensure national financial security.
- To reduce refinancing, liquidity, exchange- rate and currency risks, apply mechanisms for promoting the development of the government bond market and extend the borrowing term for an average of 4-6 years through the domestic issuance of government bonds during 2011-2015.
- To build, complete and develop the information system for monitoring, supervising and assessing public debts in a sustainable manner according to regulations.
- Public debts (including government debts, government-guaranteed debts and local administrations’ debts) must not exceed 65% of GDP by 2015, specifically, the government debit balance and national foreign debts each must not exceed 50% of GDP.
- The payable government debts (excluding amounts provided through on-lending) must not exceed 25% of the total annual state budget revenues and the payable annual national foreign debts must be below 25% of the export value of goods and services.
- The annual state foreign exchange reserve must exceed 200% of the total national short-term foreign debt balance.
5. Management principles
a/ The State uniformly and comprehensively manages public debts and national foreign debts, from the mobilization, allocation and use of loans to the payment of debts;
b/ Debt safety indicators must be kept within the approved limits to ensure national financial security and macroeconomic balances;
c/ To ensure efficiency in the borrowing and use of loans; not to borrow short-term loans for long-term investment. Foreign commercial loans may be used only for programs and projects which are capable of directly recovering capital and paying debts;
d/ Borrowers shall fulfill all debt payment liabilities for their borrowed loans;
dd/ To ensure publicity and transparency in mobilizing, allocating and using loans and paying debts. Programs and projects using loans of the Government or local administrations must be audited by the State Audit Office of Vietnam or independent audit institutions;
e/ All debt liabilities are equally treated.
6. Scope of debt management
a/ Government debts, including domestic debts (treasury bills, government bonds, amounts mobilized from funds, loans from state treasuries, etc.); foreign loans (ODA, concessional loans, commercial loans) and other loans must be managed in accordance with law;
b/ Government-guaranteed debts: loans of businesses, credit institutions and financial institutions (the Vietnam Development Bank and the Vietnam Bank for Social Policies) from domestic and foreign capital sources must be managed in accordance with law;
c/ Local administrations’ debts: issued bonds of local administrations, loans from state treasuries, amounts provided through on-lending of government foreign loans, and loans from credit institutions and other organizations must be managed in accordance with law;
d/ Foreign debts following the principle of self-borrowing and self-repayment must be managed through the certification of annual borrowing and repayment limits approved by competent authorities.
7. Major tasks and solutions
a/ To additionally mobilize loans for state budget balancing and socio-economic development investment:
- To balance loan demands and effectively implement the plan on mobilization and use of the Government’s domestic and foreign loans during 2013-2015, prioritizing the selection of long-term loans with low borrowing expenses and reasonable risk degree, specifically:
Unit of calculation: VND billion
Year | 2013 | 2014 | 2015 |
Total | 290,897 | 303,702 | 316,885 |
1. Loans for offsetting state budget overspending | 162,000 | 182,000 | 200,000 |
a/ Foreign loans | 27,000 | 33,000 | 40,000 |
b/ Domestic loans | 135,000 | 149,000 | 160,000 |
2. Issuance of bonds for transport and irrigation works | 60,000 | 45,000 | 30,000 |
3. Loans used for on-lending, loans under programs | 68,897 | 76,702 | 86,885 |
- The total loans annually considered and guaranteed by the Government during 2013-2015 to assure public debt safety indicators already approved by the National Assembly are as follows:
Unit of calculation: VND billion
Indicators | Government guarantees |
2013 | 2014 | 2015 | Total |
Total | 109,343 | 132,500 | 144,000 | 385,843 |
1. Domestic loan guarantees | 70,343 | 90,000 | 99,000 | 269,000 |
a/ Vietnam Development Bank | 40,000 | 45,000 | 45,000 | 130,000 |
b/ Vietnam Bank for Social Policies | 17,000 | 19,000 | 23,000 | 59,000 |
c/ Bonds for works (national highways 1A and 14) | 5,343 | 15,000 | 15,000 | 35,343 |
d/ Other key projects | 8,000 | 11,000 | 16,000 | 35,000 |
2. Foreign loan guarantees | 39,000 | 42,500 | 45,000 | 126,500 |
- To further control loan mobilization limits for local administrations according to current regulations on state budget management as follows:
Unit of calculation: VND billion
Indicators | Maximum debt balance limits |
2013 | 2014 | 2015 |
1. Capital planned for capital construction investment | 153,625 | 173,600 | 197,730 |
2. Local administrations’ debt balance | 46,000 | 52,000 | 59,000 |
- National foreign commercial loan limits; government foreign loan guarantees; and foreign loans and debts to be self-borrowed and self-repaid by businesses and credit institutions during 2013-2015 are as follows:
Unit of calculation: USD million equivalent
Indicators | 2013 | 2014 | 2015 |
1. GDP | 160,000 | 180,000 | 202,000 |
2. Maximum national foreign debt balance | 80,000 | 90,000 | 101,000 |
3. Foreign loan (net loan) limits | 9,200 | 10,000 | 11,000 |
a/ Government | 3,150 | 3,500 | 4,100 |
b/ Businesses and credit institutions | 6,050 | 6,500 | 6,900 |
- Government guarantees | 1,350 | 1,400 | 1,500 |
- Medium- and long-term foreign loans and debts to be self-borrowed and self-repaid | 3,500 | 3,800 | 4,000 |
- Foreign short-term loans | 1,200 | 1,300 | 1,400 |
b/ To fulfill all debt payment liabilities so as to avoid overdue debts affecting the Government’s international commitments:
Businesses and credit institutions have the responsibility and liability to use loans for proper purposes and may not use short-term loans for investment in medium- and long-term projects; and shall bear all risks and responsibility before law for loan mobilization and use and on-schedule debt repayment.
c/ To intensify risk management and reschedule a number of public debts:
- To implement the Prime Minister’s Decision No. 700/QD-TTg of June 11, 2012, approving the Scheme to reschedule international bond principals.
- To study a plan to handle exchange-rate risks and swap floating interest rates for a number of debts on the current portfolio of public debts.
- To classify debts prone to credit risk and issue criteria for assessing and ranking the debt payment capacity of borrowers and principals.
- To develop risk control instruments and warning systems, maintain and regularly inspect the process of public debt management operations.
- To intensify audit (state audit and independent audit) in accordance with the Law on Public Debt Management.
- To proactively set up and allocate provisions in accordance with law for forming capital sources to handle risks, if any.
d/ To build, complete and develop the information system for monitoring, supervising and assessing public debts in a sustainable manner:
- To further build a technical system for managing, operating and using the information system on public debts.
- To build a database on registration of loans and debts in the public sector; to monitor on-lending, guarantee, registration and handling of collateral assets, and local administrations’ debts; to build a risk warning system for the public debt portfolio.
- To develop and apply an applied software for updating, operating and searching information on state management of public debts according to regulations.
- To survey, assess, identify the scope of, collect, process, report and publicize, information on public debts, government debts and national foreign debts according to regulations.
dd/ To further improve a framework of debt management institutions and policies
- To study, devise and promulgate a new decree in replacement of the Government’s Decree No. 123/2004/ND-CP of May 18, 2004, on a number of specific financial-budgetary mechanisms for Hanoi Capital.
- To study, devise and promulgate a new decree in replacement of the Government’s Decree No. 124/2004/ND-CP of May 18, 2004, on a number of specific financial-budgetary mechanisms for Ho Chi Minh City.
- To submit to the Government for promulgation a new decree in replacement of the Government’s Decree No. 134/2005/ND-CP on borrowing of foreign loans and payment of foreign debts by businesses on the principle of self-borrowing and self-repayment, and guiding documents.
- To study and submit to competent authorities for promulgation sanctions for handling violations of investors that fail to properly and fully implement the commitments for enjoying government guarantees.
- To study and submit to competent authorities for promulgation a mechanism for managing collateral assets and mortgaged assets for programs and projects enjoying government guarantees and borrowing government foreign loans.
- To study and promulgate a mechanism guiding financial management of programs and projects funded by ODA and other concessional loans.
- To study, elaborate and submit to the Prime Minister for promulgation a list of priority sectors and fields eligible to borrow the Government’s concessional loans and foreign commercial loans in each 5-year period.
e/ To strictly control the grant and management of government guarantees
- The grant of government guarantees must comply with the Prime Minister’s Decision No. 44/2011/QD-TTg of August 18, 2011, on the list of priority programs and projects to be considered for government guarantees.
- In the immediate future, not to consider granting guarantees for the issuance of international bonds. Businesses or commercial banks may issue international bonds, if they so wish, without government guarantees.
- To consider granting guarantees for domestic loans only for urgent projects and national key works for which the Prime Minister has decided to grant guarantees.
- To intensify examination, monitoring and supervision of, and take specific handling measures for, government-guaranteed programs and projects facing difficulties in paying due debts to avoid putting pressure on the state budget’s reserve debt liability.
- To closely coordinate with managing agencies and local administrations in the grant of government guarantees for businesses to ensure that each agency properly performs its responsibilities for government-guaranteed investment projects.
- To register collateral assets securing government guarantees and monitor and supervise these collateral assets.
g/ To raise the use efficiency of loans used for on-lending
- To intensify mechanisms for risk sharing between the State and businesses and investors, and between the Government and local administrations with regard to government foreign loans used for on-lending.
- To extend on-lending mechanisms for local administrations to increase their autonomy and responsibility and ensure equal treatment among localities.
- Loans for on-lending must be selectively used, focusing on high-priority works, programs and projects; to further attach importance to the efficiency criterion when selecting a specific project.
- To increase on-lending through credit limits for capable commercial banks in case donors provide loans not by financing projects so as to increase responsibilities of on-lending agencies and borrowers.
- To expeditiously review and improve regulations on registration of loan collateral assets and handling of collateral assets according to the market mechanism, taking into account the characteristics of projects using government foreign loans.
- Ministries and localities should increase their responsibilities in appraising and approving investment projects to avoid thinned-out investment and “imitational” planning of local development; to apply a mechanism under which local administrations shall ensure debt payment capacity for their approved projects.
- Borrowing project owners should increase their responsibility and autonomy in managing amounts provided through on-lending, efficiently use loan-formed assets, strictly observe regulations on insurance for works and management of project assets and loan collateral assets, and take measures to minimize project risks and expenses.
- Project owners being major groups and corporations which are making thinned-out investment should expeditiously and resolutely conduct financial restructuring and withdraw capital from business activities other than their main business lines and prioritize the use of the withdrawn capital for debt handling.
- On-lending agencies should intensify appraising, examining and supervising projects for which they are authorized to provide on-lending and, at the same time, develop risk management and early risk detection instruments and report risks to the Government for timely handling.
8. Funds for the program implementation
a/ Funds for the program implementation come from the state budget and foreign aid sources;
b/ The Ministry of Finance shall assume the prime responsibility for, and coordinate with related units in, summarizing and including funds for the program implementation in annual state budget estimates.
Article 2. Organization of implementation
1. The Ministry of Finance shall:
a/ As the program-managing agency, assume the prime responsibility for, and coordinate with related ministries and sectors and provincial-level People’s Committees in, organizing the effective implementation of this program;
b/ Assume the prime responsibility for, and coordinate with the Ministry of Planning and Investment and the State Bank of Vietnam in, guiding, urging and examining related ministries and sectors and provincial-level People’s Committees in implementing the program; and annually update and report on the program implementation to the Prime Minister.
2. The Ministry of Planning and Investment and the State Bank of Vietnam shall base themselves on their tasks assigned in the Law on Public Debt Management and guiding legal documents to organize the implementation of the program’s relevant objectives and tasks.
3. Ministries, ministerial-level agencies and government-attached agencies shall, according to their tasks and powers, perform the state management of, monitor, examine, supervise, inspect, report and provide information on, public debts according to regulations.
4. Provincial-level People’s Committees shall manage local administrations’ debts and provide adequate, accurate and timely information and data strictly within their competence according to regulations.
Article 3. This Decision takes effect on the date of its signing.
Article 4. Ministers, heads of ministerial-level agencies, heads of government-attached agencies, and chairpersons of provincial-level People’s Committees shall implement this Decision.-
Prime Minister
NGUYEN TAN DUNG
Vietnamese
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