Vietnam Increases Bond Sales to Boost Growth

By Khanh Vu and Francesco Guarascio

HANOI (Reuters) – Vietnam has increased government bond sales by nearly 30% so far this year as it aims to boost public spending to spur growth and shield the economy from the risk of crippling U.S. tariffs.

The Southeast Asian industrial hub’s economy has expanded rapidly in recent years, growing more than 7% in 2024, thanks to foreign investment in export-oriented manufacturing plants powered by cheap labor and components often shipped from China.

Exports accounted for 87% of gross domestic product last year, with the largest share sent to the United States, according to official data.

However, the country now faces tariffs of 46% from the Trump administration on goods imported into the U.S., much higher than most regional competitors. Economists at research firm BMI estimate this could reduce growth by up to 3 percentage points.

Vietnam has kicked off trade talks with the U.S., aiming to persuade Washington to reduce or eliminate the new tariffs, which have been paused until July.

Despite a historic reluctance to increase low public debt levels, the country is selling more bonds. So far, 130.8 trillion dong ($5.04 billion) has been raised from government bonds of varying maturities this year, representing a 26.7% increase from last year, according to data from the Hanoi Stock Exchange updated to April 23.

The funds are earmarked for boosting public investment, primarily in railway and power infrastructure, and to stimulate domestic consumption to meet this year’s GDP growth target of at least 8%.

The government plans to raise around 500 trillion dong ($19.25 billion), approximately 4% of GDP, for financing this year, according to the finance ministry.

Adam Samdin from Oxford Economics noted that the government has ample room to increase public debt levels, with debt at just 36% of GDP, well below the 60% ceiling.

“If growth is lower than expected due to higher tariff rates, we think the government can afford to respond with more fiscal stimulus as well,” he told Reuters.

SPENDING PLAN

Earlier this week, Vietnam’s prime minister outlined plans to enhance public spending and ‘fully disburse’ allocated funds for ministries and local authorities, having consistently missed spending targets.

About $19 billion in public funds remained uninvested from 2021 to 2023, around 25% below plan, according to finance ministry data, resulting in the government losing billions in foreign aid.

“In Vietnam, a 1% increase in public investment boosts GDP growth by 0.06 percentage points,” said Can Van Luc, a government adviser, emphasizing the focus on growth.

Bond issuances have persisted despite higher rates. The coupon on 5-year government bonds has risen nearly 50% year-to-date to an average of 2.17%, while 10-year bonds are up nearly 25% to 2.92% according to stock exchange data.