Vietnam has no 'concrete plan' to sell global bonds this year

[HANOI] Vietnam's government will rely on domestic markets for its borrowing needs this year and has "no concrete plan" to sell international debt, a senior official said.

The state will review market conditions before it can issue a foreign bond of as much as US$3 billion, Tran Xuan Ha, a deputy minister of finance, said in an interview on Friday in Hanoi.

"We need to carefully assess market conditions internationally and domestically to ensure the highest efficiency for our bond issuance," he said.

Vietnam is borrowing more this year to fund a wider budget deficit triggered by falling revenue from oil and farming output. With global markets hit by turbulence, the nation's low inflation and stable economic growth are making domestic bonds more attractive.

Given currency fluctuations, "the borrowing cost will be probably higher" with external debt, Ha said. "Selling overseas bonds would not be a cheap option then. It's always better to borrow in your local currency than foreign currencies." The government sold US$1 billion of dollar bonds in November 2014, the first international sale in almost five years, at a yield of 4.8 per cent. It was at 3.897 per cent as of 5:30 pm in Hanoi on Friday. The yield on the benchmark five-year domestic bond has dropped 48 basis points to 6.15 per cent since the beginning of this year, according to data from banks compiled by Bloomberg.

Communist Party-ruled Vietnam is boosting spending to meet a 6.7 per cent growth target this year. The economy will need to expand 7.6 per cent in the second half of the year to achieve that goal, according to a copy of a speech that Prime Minister Nguyen Xuan Phuc is due to deliver to lawmakers in Hanoi next week.

BLOOMBERG