A dam is built on a Central Highlands farm. The Government has petitioned the National Assembly to issue more bonds to raise capital for socio-economic projects, including rural and irrigational ones. — Photo baogialai.com.vn

HA NOI (Biz Hub) ― The Government has petitioned the National Assembly (NA) to issue VND170 trillion (US$8.1 billion) in additional State bonds within the next three years to provide supplementary finances for economic development.

Minister of Planning and Investment Bui Quang Vinh presented the scheme for discussion at the NA on Wednesday, saying the amount was necessary to build infrastructure to enable Viet Nam become a modern industrial nation by 2020.

It would also help speed up progress of unfinished projects funded by State bond sources, but lacking capital.

The national development plan for 2011-15 calculated that the total capital from State bonds within the period would be VND225 trillion ($10.71 billion), meaning about VND45 trillion was to be mobilised every year.

But investment declines revealed that more capital was needed, Vinh said.

"The economy is facing significant difficulties, with a sharp decline in overall social investment capital on GDP due to less investments from the State budget and slower financing from the private sector. Total demand had fallen strongly, and issuing State bonds is needed to stimulate investments," he said.

Of the suggested sum, the Government proposed using VND61.68 trillion ($2.94 billion) to invest in National Highway 1A and National Highway 14 (Ho Chi Minh Expressway through the Central Highlands), and VND73.32 trillion ($3.49 billion) for uncompleted projects.

About VND20 trillion ($952.38 million) would be spent implementing official development assistance (ODA) projects and aiding poor and tough localities, and VND15 trillion ($714.28 million) for rural infrastructure development within a national programme focusing support on ethnic people in mountain areas.

Vinh said if the plan was adopted, about three quarters of uncompleted traffic plans, irrigation and health-care projects funded by State bond financing schemes for 2011-15 would get enough capital to finish the work.

He said that the Government would assure public-debt security, and that the new bonds would not affect money supplies in circulation. But he admitted an increase in Government spending through the issuance could have short-term impacts on the demand for commodities and services – and prices.

Phung Quoc Hien, chairman of the NA Finance and Budget Committee, said most NA deputies agreed with the issuance plan because "public debt is still below the permitted limit – under 65 per cent of GDP".

But he said money mobilisation and debt settlement would be difficult and the Government needed proper measures to handle them.

State bonds issued for annual socio-economic goals are often of short and medium terms so debt payment frequency is high. Any over-focus on State bond issuance could slim down capital flows through commercial banks, insurance companies and the stock market – narrowing finances for production and business activities.

Some committee members suggested the Government should only issue about VND120 trillion ($5.7 billion) above 2014-16 to suit national finance abilities and assure spending in other areas.

Vinh argued that, in practice, the VND170 trillion amount wouldn't be enough for restructuring the economy and mobilise adequate financial sources from economic sectors. ― VNS