Debt of state-owned firms rising but within safe ratio
Debt of state-owned firms rising but within safe ratio
While a recent government report showed that total debts of the 93 biggest state-owned enterprises (SOEs) in 2014 increased 8 per cent compared to 2013, a representative from the Government said the figure was still within the safe ratio.
Speaking at a press conference held after the regular government meeting last week, government spokesman Nguyen Van Nen, said the enterprises' debt, currently at VND 1.5 trillion (US$68 billion), was 1.41 times higher than their equity.
He added that this still within a safe debt-to-equity ratio of less than 3.
He said the companies still managed to make all their payments on deadline.
Responding to concerns over the fact that sustainability of Viet Nam's public debt could be threatened if the enterprises fail to operate effectively, Nen assured that the Vietnamese Government had been applying strict discipline when guaranteeing SOEs' loans.
Currently, the Government is guaranteeing about 63 per cent of SOE's foreign debt.
Nen said the government guaranteed SOEs' foreign loans as they were tasked with major projects, and local resources still fell short of the funding demand.
Moreover, Nen said, with the government's guarantee, the businesses' debt servicing costs would be lower than when they took out loans on their own.
"The fact that the Government has been guaranteeing these business loans to conduct major investment projects play an important role at times when domestic capital is not sufficient for the demand of investment and development," Nen said.
"Enterprises must be responsible for using the loans effectively and taking the risks as well as all duties required by the law when mobilising, managing the loans and paying debts in time," Nen said.
SOEs' debts guaranteed by the government accounted for 19 percent of the country's public debt, and was equivalent to 11.4 percent of gross domestic product, he said.
Viet Nam's public debt is expected to reach 61.3 percent of gross domestic product at the end of December, while foreign debt is set to hit 41.5 percent.
