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Vietnam’s current public debt status versus Argentina’s in 2001

Vietnam’s current public debt status versus Argentina’s in 2001

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rate, on a basket of eight hard currencies, and on dollar supply and demand on the domestic

market, macro-economic issues like inflation and interest rates also affect the daily average

inter-bank exchange rate. This new foreign exchange rate measure enables the foreign

exchange regime more flexible depending on daily movements of hard currencies in the world

but still keep it under control of State Bank of Vietnam in order to stabilize the foreign

exchange market and the economy, support domestic production and businesses activities. It

also helps Vietnam more actively to cope with potential risks from the international financial

market.

Figure 15. Contrasting Vietnam in the period 2014-2017 with Argentina from 1999 to

early 2000s

Vietnam, 2014-2017



Argentina , 1999-2000s



Economic growth rate



6.4%



Negative



Unemployment rate



3%



>15%



Foreign debt (% of GDP)



41.8%



50%



Bond credit rating



B1



-



Foreign exchange rate

system



Managed floating rate

system



Fixed exchange rate system



Source: self-research

3. Proposals for Vietnam

As a good result, Vietnam is less likely to be hit by a debt crisis like the case of Argentina in

2001. However, Vietnam should not be subjective as Vietnam’s debt indicators are at high

level. Therefore, Vietnam should implement some measures to keep its debt ratio in safe zone,

as following:

Firstly, continuing to implement a tightened fiscal policy, with savings and restructuring

expenditures, including capital expenditure and recurrent expenditure, as well as to not

promulgate new policies that increase or decrease State revenues.

Secondly, the allocation of capital investment should be in a concentrated and efficient manner,

while prioritizing capital for investment in key infrastructures, promoting public-private

partnerships and non-State investment, and strictly implementing the medium-term financial

budget plan to allocate State budget in order of priority.

Over the past few years, although the Government has made efforts to promote publicity and

transparency in the management of the State budget, but in reality, compared with international

practice, the announcement of the state of Vietnam’s State budget is still backward, simplistic

and lagging behind. Meanwhile, the access to and identification of budget issues at local levels

is still weak. In order to shorten this gap, it is necessary to continue to improve the legal

framework, guide the implementation of the relevant legal bases, and enhance the

accountability of the person who makes financial decisions, as well as attaching personal

responsibility to the financial consequences, including in the State-owned enterprise sector.

Along with the renewal of policies and regulations on public expenditure and public debt, the

effective management, use and distribution of the scarce resources is critical for ensuring that



the national socio-economic development objectives are met and ensuring the national

financial security.



Conclusion

In conclusion, we sum up main points that my group found out. First of all, as being one of the

largest economy in the Latin America in terms of polulation and GDP, the fixed exchange rate

system in which Argentina pegged its currency in USD dollar helped Argentina managed rising

inflation and made it as one of the most competitive economy in the Latin America. In this

period, Argentina’s government paid hight rate of interest on its bonds, therefore, the

investment poured into this Latin country increased dramatically, contributing to the

impressive economic growth in the 1990s. However, in late 1990s, Argentina faced with the

competition from Brazil, which devaluated its currency to boost exports, led to the reduction

of Argentina’s budget revenue. In addition, as Argentina fixed its currency in USD dollars, in

the late 1990s, the overvalued of USD made Argentina’s goods missed its competition in the

global market. As a bad result, its government lost the ability to repay to international creditors

who holding Argentina’s bonds with high interest rate of return. For these reasons, Argentina

had to announce default in 2001. In the second part of this paper, we point out the recovery of

Argentina after the 2001 terrible debts crisis. In the period of 2002-2016, we divided

Argentina’s economy development into three periods. The first period of 2002-2007 saw the

quick recovery of Argentina’s economy. The next stage of 2008-2009, the global financial

crisis hit this South America countries in short term as sharp decline in exports, contributing to

the negative GDP growth rate from Q3-2008 to Q3-2009. In the last term from 2010 to 2016,

Argentina economy saw a downturn in GDP growth rate from roughly 10% to -2% in 2016. So

far, Argentina’s economic growth is projected to get better in the following years as

government’s efforts to reform the economy. In the last part of this article, we take a brief

comparison between the current debts status of Vietnam with the early 2000s debts in

Argentina and recommend some measures for Vietnam authority to use foreign borrowed

capital more efficiently. Based on figures that we analyzed as well as the economic

development status of Vietnam currently, we assume that there is a limited level of ability to

cause a debt crisis as the 2001 in Argentina in following years in Vietnam.



REFRENCES:

BBC. (2014). Argentina defaults for second time. Retrieved from

http://www.bbc.com/news/business-28578179

Dhillon, A., Garcia-Fronti, J., Ghosal, S., & Miller, M. (2006). Debt restructuring and

economic recovery: analysing the Argentine swap. Retrieved from

https://www2.warwick.ac.uk/fac/soc/economics/staff/mmiller/esrcproffellows/pub/arg

swap.pdf

Ieconomics. (2017). Argentina - Government debt to GDP. Retrieved from

https://ieconomics.com/argentina-government-debt-to-gdp

International Institute for Labour Studies. (2011). Argentina - Case study of past crises. ECIILS Joint Discussion Paper Series No. 3

Than, X. (2017). Dư nợ cơng Việt Nam khoảng 64.73%GDP tính đến cuối năm 2016

[Vietnam’s public debt is about 64.73% by the end of 2016]. Retrieved from

http://vov.vn/kinh-te/du-no-cong-viet-nam-khoang-6473gdp-tinh-den-cuoi-nam-2016584200.vov

Weisbrot, M., & Sandoval, L. (2007). Argentina’s economic recovery: policy choices and

implications. Retrieved from

http://cepr.net/documents/publications/argentina_recovery_2007_10.pdf

Wiel, I. (2013). The Argentine crisis 2001/2002. Retrieved from

https://economics.rabobank.com/publications/2013/august/the-argentine-crisis20012002-/



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