As of 2018, Vietnam’s government-guaranteed debts hit US$27.7 billion, including US$23.7 billion from foreign lenders and US$4.1 billion from domestic sources, according to latest report from the Ministry of Finance (MoF).
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According to the MoF, the power sector has the largest number of projects guaranteed by the government, due to stable revenue and high debt paying capability.
However, the financial guarantee mainly focuses on major state-owned corporations, leading to high risks in case of these state-owned enterprises (SOEs) getting into troubles. These include Vietnam Electricity (EVN) - the sole electric distributor in the country, Vietnam National oil and Gas Group (PetroVietnam), and Vietnam National Coal and Minerals Group (Vinacomin).
Of the total, EVN accounted for the largest with 58.43% of total funds guaranteed by the government in the power sector as of the end of 2018 or US$10.1 billion, down 1.94% against 2017, while that of PetroVietnam was 17.61% or US$3.3 billion, up 1.54%.
Total financial guarantee by the government in the power sector reached US$17.3 billion as of December 31, 2018, stated the report.
Since 2018, the MoF has not issued government guarantees for projects financed by domestic funds, however, in the power sector, the government has issued guarantees for expanded Song Hau 1 and Vinh Tan 4 thermal power plants worth US$1.6 billion.
In addition to the power sector, the government also issued guarantees for the aviation industry, including national flag carrier Vietnam Airlines with US$1.03 billion and Vietnam Aircraft Leasing Company with US$297.4 million.
Projects unable to service debt
Debts from projects backed by the government in 2018 have been fully repaid. However, the government had to allocate US$8.13 million to repay debt for Vietnam Paper Corporation, taking the total amount being paid in advance to settle the company’s debt at US$97 million.
As of the end of 2018, the Ministry of Industry and Trade and Vietnam Paper Corporation have not been able to liquify assets from the loss-making Phuong Nam Paper plant project to recover state capital.
Other projects subject to government covering debts include the La Son – Tuy Loan expressway project under the Ministry of Transport worth US$44.1 million, Ha Long cement project with US$58.22 million, Dong Banh cement project with US$16.55 million, and the Thai Nguyen cement project with US$34.33 million.
