Public Debt of Vietnam: Risk and Challenges

Abstract

       The paper aims to analyse risks and challenges of Vietnam's public debt. The analysis is a combination of statistical description and numerical simulation. It basically shows that the public debt sustainability and liquidity are still below the conventional safety thresholds but the macroeconomic conditions are quickly deteriorating as a result of the recent highly-rising public debt. Given the Vietnamese government's targets, the benchmark scenario implies that Vietnam's public debt to GDP ratio will consistently increase to around 65% in 2015 and then 82% in 2020. Facing increasing risks of high public debt and limited potential revenue sources, the only way for the government to avoid an explosive path of public debt is to reduce public spending seriously and persistently.