Vietnam plans another $1b international bond issue

At a conference reviewing the financial sector in 2014 held on December 24, Minister of Finance (MoF) Dinh Tien Dung stressed that Vietnam planned to hold the issue, but that the timing had not yet been decided.

Vietnam is hoping to reduce the cost of its foreign borrowing and take advantage of its improving credit profile. In November Fitch raised the country’s credit rating to BB-, three levels below investment grade. Besides, in December Moody’s has upgraded the country’s banking system to stable from a negative assessment, a revision which comes after the agency raised Vietnam’s credit rating in July this year to B1, four steps below the investment grade.

In early November 2014, the MoF successfully held a $1 billion bond issue to restructure its high interest foreign loans. Thanks to favourable market conditions the bonds sold with a fixed interest rate of 4.8 per cent, lower than the estimated 5.125 per cent rate and the lowest the country has achieved so far. Bond issues held in 2005 and 2010 sold with 6.875 per cent and 6.755 per cent rates, respectively.

During the conference the MoF noted that thanks to improvements to the global capital market, the MoF was planning to request the government’s approval for an additional bond issuance in the near future.

At the most recent session of the National Assembly, a government report estimated Vietnam’s public debt at approximately 60.3 per cent of GDP. It forecasted that by 2015 this figure would rise to 64 per cent, bordering dangerously near the 65 per cent ceiling set by the National Assembly. This raised concerns from many delegates. The finance minister said the country has always guaranteed full, timely payments and does not have a history of bad debts, but admitted that the current debt structure is not stable.

Vietnam’s economy grew by 5.62 per cent in the first three quarters of 2014 compared to the same period last year. The government has cut policy interest rates twice this year, aiming to boost whole year growth to 5.0 per cent, above the World Bank’s estimate of 5.6 per cent. The World Bank estimates growth in 2015 of 6.2 per cent.