Since public debt, one of the most fundamental problems facing the country, remain a mystery under the hands of administering agencies, local people are concerned that it may be too late to cure this disease.

The public debt issue was once again put on the table when the National Assembly’s  Economic Committee presented a public debt report earlier this week, pointing out the high threat caused by huge debts from the State-owned sector and that these debts may be covered by the State budget. The nation’s public debt is disguised by a satisfactory number recently announced by the Ministry of Finance, at just 54.9% of GDP (gross domestic product) in 2011, while the ministry has insisted that the figure is still within the safety zone. However, in reality real public debt is much bigger according to economists. Some even believe that the figure may be 106% of GDP, or nearly double the figure released by the Government, in accordance with the international practice.

Local media this week has carried out severe criticism of public debt since these figures have proved to be confusing and unreliable. As reported by Vnexpress, Dr Luu Bich Ho says that the nation’s public debt must be at around 106% of GDP given his calculations, meaning that there is 106 dong borrowed on every 100 dong generated by the nation. In the report of the National Assembly’s Economic Committee, its ratio was 95 dong borrowed on every 100 dong earned.

Explaining the difference in the figures, Dr. Nguyen Trong Hau from Almammer University in Poland said on Vietnamnet news site that international organizations such as the World Bank and International Monetary Fund calculate the public debt by considering five factors, while Vietnamese experts consider three factors only. The two factors which have not been considered by Vietnam are the debts incurred by State-owned enterprises and the State’s borrowing from the pension fund. Hau says that with the current Vietnamese calculation method, some huge debts worth billions of dollars like Vinashin scandal have been left out.

Aside from concerns over these ambiguous figures, many experts fear for future consequences. They say that it is time for Vietnam to have a straightforward look at the bad debt disease to figure out a way forward to cure this self-inflicted sickness. Nguyen Duc Thanh, director of the Vietnam Center for Economics and Policy Research (VEPR) of Hanoi University of Economics, points out on Vnexpress that Vietnam is bearing huge public debt compared to GDP per capita. The figure must have surpassed 100% of GDP a long time ago given international standards.

“Commonly, countries with large public debt have high standards of living but Vietnam seems to be joining the opposite group, including nations who have low GDP per capita but have huge debts. This is really a big concern,” Thanh explains.

Le Dang Doanh, former director of the Central Institute of Economic Management (CIEM), says that public debt at either 95% or 106% is a dangerous figure. Doanh has suggested the National Assembly make clear the real figure to avoid following the same path of failure of Greece. The European country concealed real public debt while borrowing big loans from international financial markets to compensate for budget deficits. Until crisis broke out in the nation, Greece’s public debt was revised to the whopping level of 110% of GDP.

“Even though the real public debt figure is not good news, the nation would rather know thoroughly about the disease and seek the right therapy as soon as possible rather than conceal it and suffer heavy results in the future,” Doanh adds.

To deal with the problem, many experts have suggested that Vietnam should follow the international practice when calculating public debt instead of feeling content at “safe” figures. The Government should clarify the criteria it uses to assess the safety of public debt and submit it to the National Assembly for approval. This would allow Vietnam to have a better outlook over the debt situation and make reasonable decisions to settle debts.

As reported by Tien Phong, the National Assembly Economic Committee has suggested establishment of a public debt supervisory committee belonging to the National Financial Supervisory Committee to secure serious and objective management over the issue. This agency will be allowed to update all information of public debt, foreign debt from ministries and State-owned units. The committee will provide the foundation for public debt supervisors to watch total debts of the public sector and suggest suitable policies for the National Assembly.

As the public debt problem is believed to have already reached alarming levels, the real figure of the nation’s public debt should be brought to light immediately to avoid disastrous consequences in the future. Le Dang Doanh is quoted by Vnexpress as saying that there will be a huge burden placed on the shoulders of the next generations if the truth is covered up. People living and working in Vietnam will be hampered by public debt, meaning that the current generation is taking out unpayable loans that the next generations will have to settle. This is totally unethical, Doanh says.

Source: SaigonTimes.