State budget cannot bear debt burden of SOEs

State budget cannot bear debt burden of SOEs

The Ministry of Finance (MOF) has to advance $1 billion to pay debts for state-owned enterprises (SOEs) which cannot pay debts because of big losses.

While public debts have increased rapidly, SOEs are still asking the government to guarantee their commercial loans worth billions of dollars.

The latest MOF report to the National Assembly on the government use of loans showed that foreign debts guaranteed by the government reached $2.44 billion in 2014, up by 22 percent.

This means that the government-guaranteed foreign debts have reached VND234.939 trillion, accounting for 52 percent of the government-guaranteed total debts and 10 percent of total public debts.

Of the eight projects which borrowed foreign loans with the government’s guarantee, there are six power projects, including the Thai Binh 2 thermal power plant developed by PetroVietnam ($937 million) and the Lai Chau hydropower plant ($300 million).

The first private invested power project approved by the Prime Minister was the 620 MW Thang Long thermal power plant in Quang Ninh province developed by Gelemxico. The government guaranteed a $674 million loan from two Chinese banks.

According to MOF, the government came forward and acted as a guarantee for the commercial loans that served national key projects.

However, analysts noted that not all the loans guaranteed by the government were for national key projects. The Bac Me hydropower plant in Ha Giang province with the designed capacity of 45 MW only also got a government guarantee for a $55.4 million loan from SMBC.

This is one of three hydropower projects developed by Vietracimex, which is also the investor of Da Dang thermal power project in Lam Dong province, where a serious accident occurred, trapping 12 workers.

The two other projects are the Nhan Co alumina project of the Vietnam Coal and Mineral Industries (Vinacomin) and the Vietnam Airlines’ procurement of two A321 aircrafts.

In principle, if the borrowers cannot pay debts, MOF will have to advance money from the national sinking fund to make payments for the debtors.

The State Audit Agency, in a report on the 2013 state budget audit, showed that the amount of money taken from the sinking fund to pay debts was high, warning that the SOEs’ debt payment duties are in danger of becoming the state’s budget obligation.

According to Dr. Nguyen Thi Thuy Duong from the Hanoi Economics University, the sinking fund had to pay VND1.676 trillion in 2010, VND2.4 trillion in 2011 and VND2.58 trillion in 2012.

According to the State Audit, in 2013, the sinking fund had to pay debts for six projects totaling VND992 billion, or $47 million.

Meanwhile, according to MOF, in 2014, the ministry withdrew another VND1.72 trillion from the fund to pay debts.

vietnamnet