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Vietnam: Government eases regulations on firms’ loan guarantee
The Hanoitimes – Prime Minister Nguyen Xuan Phuc recently signed a decision to ease regulations on granting guarantee for new domestic and foreign loans taken by enterprises.
Under Decision No. 433/QĐ-TTg signed on April 20, the government will only limit its guarantee for new domestic and foreign loans of enterprises to implement their investment projects, instead of temporarily stopping all guarantees for new loans as previously.
PM Phuc also tasked the Ministry of Finance to review the list of projects guaranteed by the government in the first half of 2018 and submit it to him for consideration and approval.
The new regulation is aimed to amend and supplement the Decision No. 544/QD-TTg dated on April 20, 2017 on approving medium-term debt management program in 2016-2018 period.
The government approved the medium-term debt management program last year. The overall objective of the program is to mobilize loans at appropriate costs and risk to meet the needs of balancing the state budget and socio-economic development in certain periods. Besides, the allocation and use of loan capital must be for the right purposes, ensuring the debt repayment capability; maintaining the public debt index, government debt and national foreign debt at a safe level, national financial security, in line with Vietnam’s context and international practice.
Under the program, public debt (including government debt, government guaranteed debt and local government debt) is set not exceed 65 percent of GDP, of which government debt and foreign debt are not over 54 percent and 50 percent of GDP respectively.
The program sets specific targets for domestic and foreign borrowing to finance the state budget deficit in a downward direction, of which the budget deficit in 2018 is 3.3 percent of GDP.
The decision states that mobilizing government loans to finance the state budget deficit is some VND606.4 trillion in 2016-2018, of which VND186.9 trillion is in 2018.
Borrowings for repaying the principle debt are about VND414.4 trillion in the period, including VND138 trillion in 2018. The new loans for annual repayment of principal debt will be decided by the government and stated in its resolution on annual state budget estimates.
The government’s re-borrowings from foreign loans are about VND118.4 trillion, including VND44 trillion in 2018.
Regarding the Government guarantee, in implementation of the National Assembly’s Resolution No. 25/2016 / QH14 dated November 2016 on approving the national five-year financial plan for the 2016-2020 period, the governmental guarantee shall be strongly reduced. Specifically, for the bond issuance by the Vietnam Development Bank and the Social Policy Bank, the maximum limit for bond issuance underwriting shall be controlled by the obligation for annual principle debt repayment to stabilize the debt balance. For the foreign loans which have been issued Government guarantee and disbursing, the annual net withdrawal limit is $1 billion per annum.
As for the local government borrowing, the limit of overspending and debt of local authorities is regulated by the Law on State Budget in 2015, with the budget deficit of about VND11,100 billion in 2018.
According to the program, in order to allocate the sources for fully meeting the government’s debt repayment obligations and avoiding overdue debts and affecting international commitments of the government, enterprises and credit institutions shall have the responsibility and obligation to use the borrowed capital for the right purposes and not use short-term loans for investment in medium- and long-term programs and projects. They must bear all risks and take responsibility before law in the process of mobilizing and utilizing loans and due repayment.
The new regulation is aimed to amend and supplement the Decision No. 544/QD-TTg dated on April 20, 2017 on approving medium-term debt management program in 2016-2018 period.
The government approved the medium-term debt management program last year. The overall objective of the program is to mobilize loans at appropriate costs and risk to meet the needs of balancing the state budget and socio-economic development in certain periods. Besides, the allocation and use of loan capital must be for the right purposes, ensuring the debt repayment capability; maintaining the public debt index, government debt and national foreign debt at a safe level, national financial security, in line with Vietnam’s context and international practice.
Under the program, public debt (including government debt, government guaranteed debt and local government debt) is set not exceed 65 percent of GDP, of which government debt and foreign debt are not over 54 percent and 50 percent of GDP respectively.
The program sets specific targets for domestic and foreign borrowing to finance the state budget deficit in a downward direction, of which the budget deficit in 2018 is 3.3 percent of GDP.
The decision states that mobilizing government loans to finance the state budget deficit is some VND606.4 trillion in 2016-2018, of which VND186.9 trillion is in 2018.
Borrowings for repaying the principle debt are about VND414.4 trillion in the period, including VND138 trillion in 2018. The new loans for annual repayment of principal debt will be decided by the government and stated in its resolution on annual state budget estimates.
The government’s re-borrowings from foreign loans are about VND118.4 trillion, including VND44 trillion in 2018.
Regarding the Government guarantee, in implementation of the National Assembly’s Resolution No. 25/2016 / QH14 dated November 2016 on approving the national five-year financial plan for the 2016-2020 period, the governmental guarantee shall be strongly reduced. Specifically, for the bond issuance by the Vietnam Development Bank and the Social Policy Bank, the maximum limit for bond issuance underwriting shall be controlled by the obligation for annual principle debt repayment to stabilize the debt balance. For the foreign loans which have been issued Government guarantee and disbursing, the annual net withdrawal limit is $1 billion per annum.
As for the local government borrowing, the limit of overspending and debt of local authorities is regulated by the Law on State Budget in 2015, with the budget deficit of about VND11,100 billion in 2018.
According to the program, in order to allocate the sources for fully meeting the government’s debt repayment obligations and avoiding overdue debts and affecting international commitments of the government, enterprises and credit institutions shall have the responsibility and obligation to use the borrowed capital for the right purposes and not use short-term loans for investment in medium- and long-term programs and projects. They must bear all risks and take responsibility before law in the process of mobilizing and utilizing loans and due repayment.
Source: http://www.hanoitimes.vn/economy/2018/04/81E0C56E/government-eases-regulations-on-firms-loan-guarantee/