MoF issues feedback on Moody's downgrade of Vietnam

October 12, 2019 | 08:52

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“Vietnam has never delayed paying government debts,” the Ministry of Finance (MoF) voiced as Moody’s placed the Ba3 local and foreign currency issuer and senior unsecured rating of the local government under review for downgrade.

mof issues feedback on moodys downgrade of vietnam

The MoF sharply questioned Moody's decision

According to the MoF, Moody’s decision was based on some assessments that the lack of collaboration between local authorities has led to delay in paying the government’s debts. However, the ministry argued that the assessments only targeted contingent liabilities which are under the government’s issuance, while direct debits are paid on time.

Therefore, the US business and financial company's decision to put Vietnam under review is inappropriate. “Moody’s needs to distinguish the government’s obligation in paying contingent liabilities and direct debits,” said the MoF. “The Vietnamese government has been performing the role of guarantor in debt payment without a fault, and has been paying debts even before receiving the lender’s official request.”

Regarding the issue, Jacques Morisset, World Bank lead economist in Vietnam, said that the national exchange reserve is large, Vietnam’s public expenditure is lower than the previous years, so the country has much money to pay debts.

In the same view, Dinh Tuan Viet, World Bank senior economist, said that Moody’s recent information is just for consideration, and yet to be an official announcement about downgrading Vietnam.

“The country is not short of money to repay its debts,” Viet emphasised.

Moody’s on October 9 placed the Ba3 local and foreign currency issuer and senior unsecured ratings of the Vietnamese government under review for downgrade. The decision is driven by institutional deficiencies that have come to light.

In particular, Moody's has become aware of delayed payments on an obligation by the government. While the information available so far points to no or minimal losses for creditors, the co-ordination gaps within the administration that the delayed payments may reflect point to creditworthiness that may no longer be consistent with a Ba3 rating.

During the review period, Moody's will assess the practices and systems the government has or is instituting, to ensure reliable, timely, and smooth payment of all obligations.

By Van Anh

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