Public debt must become a tool for development.

Is public debt a burden or a tool for development, bringing the economy closer to the goal of sustainable growth and prosperity? The amended Law on Public Debt Management, soon to be considered and passed by the 15th National Assembly at its 10th session, will play an important role in answering this question.

Looking back at the history of global public debt, it's easy to see a common denominator: countries falling into crisis often make mistakes in at least one of three areas: lack of transparency, poor risk management, and borrowing not linked to growth.

Greece in 2009 is a prime example. When information about budget deficits and public debt was concealed for years, the moment it "broke," market confidence collapsed instantly, bond yields soared, and the country had to resort to a bailout package worth hundreds of billions of euros from the EU and the International Monetary Fund (IMF). The public debt crisis in Argentina in 2001-2002, or more recently Sri Lanka in 2022, both share a commonality: large-scale borrowing in foreign currency without anticipating exchange rate risks.

When the domestic currency depreciates, the burden of foreign debt balloons, exceeding the ability to repay. The aforementioned countries borrow primarily to cover their current expenditure deficits.

Conversely, Japan, a country with public debt exceeding 200% of GDP—the highest among developed nations—has maintained a stable credit rating because the majority of its debt is domestic; it is invested in infrastructure, education , healthcare, and science and technology.

The draft Law amending and supplementing several articles of the Law on Public Debt Management has strived to overcome shortcomings to avoid repeating past mistakes in public debt. The new regulations clearly state that the total annual borrowing must not exceed the public debt ceiling decided by the National Assembly ; and the issuance of bonds with maturities of less than 5 years should be minimized. This is a firm message: no hot-up borrowing, no accumulating short-term debt to "patch" immediate spending needs; minimizing the risk of having to restructure debt repayments in a short period.

According to the draft, the Ministry of Finance must periodically publish public debt information on a quarterly and annual basis, instead of only reporting annually as before. By publishing quarterly information, the Government has made a strong commitment to transparency; creating conditions for the National Assembly, voters, investors, and international organizations to have up-to-date information.

Furthermore, while borrowing plans were previously short-term, the new regulations now require the development of a 5-year public debt strategy and a 3-year public debt borrowing and repayment plan, along with risk scenarios related to exchange rates, interest rates, and growth.

A major drawback in the past was the decentralized management mechanism. Accordingly, many ministries, sectors, and localities participated in borrowing and using capital, leading to consequences such as some borrowing beyond their repayment capacity and others reporting late, making it difficult to accurately control overall public debt. The draft clearly states that the Ministry of Finance is the sole coordinating agency for unified public debt management; creating a solid foundation for formulating synchronized borrowing policies and coordinating fiscal and monetary policies harmoniously.

Linking public debt to sustainable development, a lesson from Japan, is also clearly reflected in the draft. Accordingly, loan capital will be prioritized for key infrastructure projects that have the potential to generate returns or create growth momentum...

It is clear that the new regulations on public debt are not merely technical in nature, but also clearly demonstrate the goal of establishing a "contract of trust" between the State and society. Citizens, businesses, and investors will have greater confidence in the economic outlook and will be more willing to contribute financial and human resources if they see that tax money and borrowed capital are being managed transparently, responsibly, and towards sustainable development.

ANH THU

Source: https://www.sggp.org.vn/no-cong-phai-thanh-cong-cu-phat-trien-post810145.html