Moody's Investors Service has today placed the Ba3 local and foreign currency issuer and senior unsecured ratings of the Government of Vietnam under review for downgrade.
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These weaknesses seem to reflect deficient coordination and planning among various arms of the government, with a degree of opacity around the decisions and actions needed to meet some of the government's obligations; and complex bureaucratic processes that can obstruct the smooth and timely payment of government obligations.
“While the information available so far points to no or minimal losses for creditors, the coordination gaps within the administration that the delayed payments may reflect, point to creditworthiness that may no longer be consistent with a Ba3 rating,” it said.
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.
Moody's would downgrade Vietnam's rating if the rating review concludes that administrative gaps are such that a non-negligible risk of future delayed payments remains.
Meanwhile, Moody's would maintain and confirm Vietnam's Ba3 rating if the rating review were to conclude that there is evidence of clear and effective steps being taken that offer very high confidence that all debt obligations will be honored in a smooth and timely manner.
Moody's expects to complete the review within three months.
Vietnam's long-term foreign currency (FC) bond ceiling at Ba1, its long-term FC deposit ceiling at B1, and its local currency bond and deposit ceilings at Baa3 are unchanged. The short-term FC bond and deposit ceilings remain unchanged at Not Prime.
Independent of the outcome of the rating review, Vietnam's credit profile will remain underpinned by strong growth potential. Absent significant economic or contingent liability shocks, Moody's expects the government's debt burden to remain broadly stable, just under 50% of GDP.
