Thai firm’s Sabeco stake acquisition sends Vietnam’s foreign debt soaring

Credit taken out by Thai Beverage Co Ltd and its affiliates to fund the acquisition of a stake worth US$4.8 billion in Saigon Beer Alcohol Beverage (Sabeco) led Vietnam’s foreign debt to rise sharply in 2017, according to a recent Government report sent to the National Assembly.


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Credit taken out by Thai Beverage Co Ltd and its affiliates to fund the acquisition of a stake in Sabeco led Vietnam’s foreign debt to rise sharply in 2017



Vietnam’s short-term foreign debt stood at US$21.9 billion in 2017, with one-fourth of it coming from the short-term loan totaling US$4.8 billion borrowed by Vietnam Beverage Co Ltd, Thai Beverage’s Vietnam unit, to purchase a 53.6% stake in Sabeco. As a result, Vietnam’s short-term foreign loan growth reached a whopping 73% compared to the previous year.

The Government’s debt management program in the 2016- 2018 period caps the annual growth rate of short-term foreign debt at only 10%.

The unexpected growth in short-term foreign debt owed by enterprises and credit institutions has impacted the safety threshold of Vietnam’s foreign debt, and forced the Government to revise numerous 2018 public debt limits to keep debt at safe levels, said the report.

The Sabeco acquisition deal also led to a reduction of the nation’s foreign reserves while debt payment obligations rose strongly. Short-term foreign credit taken out by banks to make short-term loans and maintain liquidity soared as well.

By the end of 2017, the country’s outstanding foreign debt had amounted to VND2,451 trillion (US$107.7 billion), or 49% of gross domestic product (GDP), nearly touching the National Assembly-approved debt threshold of 50%.

The reason behind the growing foreign debt is the increasing number of loans taken out by companies. Growth of medium- and long-term loans was 22.56% and that of short-term loans was 73% compared to 2016.

To keep national debt at safe levels, the Government has capped foreign loans of credit institutions and enterprises in 2018 at US$5 billion.

SGT

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