The National Assembly Economic Committee and the United Nations Development Program (UNDP) in Vietnam have just released the report `Public debt and sustainability in Vietnam: Past, present and future`.
The Latin American debt crisis of the 1980s was called the `Lost Decade` and had been brewing since the 1970s. During that period, Brazil, Argentina and Mexico developed quite strongly, mainly due to large-scale foreign borrowing.
However, by the early 1980s, Latin American countries began to have difficulty repaying their debts.
Most world financial institutions and banks have refused or reduced lending to other Latin American countries.
The debt crisis here began in August 1982 when Mexico declared default.
Mexico defaulted on its debt, opening the door to the crisis in Latin America in the 1980s. Photo: CNN
To have money to repay debt, they turned to international organizations such as the International Monetary Fund (IMF) and the World Bank (WB).
Later, Mexico liberalized trade and gradually applied market economic institutions.
In 1994, Mexico gradually devalued the peso to attract foreign investment.
However, the US, IMF, WB, and Bank for International Settlements promptly supported nearly 40 billion USD for Mexico.
In East Asia and Southeast Asia, the crisis came immediately after a period of impressive economic growth.
The East Asian financial crisis officially began in July 1997 with the collapse of the Thai baht due to massive capital flows withdrawing from this country.
The spillover effect caused Western investors to suddenly withdraw capital, causing the currencies of other countries in the region to devalue in turn.
The financial crisis quickly turned into a severe economic recession.
The IMF had to launch a $36 billion rescue program at the end of 1997 to stabilize the currencies of the countries most affected by the crisis.
The most recent and longest public debt crisis is in the euro area.
Greece is the first country in the eurozone to ask for financial aid.
According to analysts, the crisis took place right after a credit boom period, low interest rates for risk provisioning, excess liquidity, high financial leverage and real estate bubble.
The crisis has cost trillions of dollars in financial income to EU member states, due to the continuous devaluation of the euro.
However, response measures in Europe are only focused on coping with immediate financial difficulties in countries, in order to avoid the impact of contagion throughout the region.
However, the situation here still shows no signs of improvement.
From the above analysis, the authors of the report `Public debt and sustainability in Vietnam: Past, present and future`Â argue that Vietnam needs to be cautious in borrowing from the Government and have a financial monitoring mechanism.
* See more: 100 dong of GDP, 95 dong of debt
Regarding public investment, the report said that Vietnam needs to avoid waste to reduce the budget deficit.
In addition, macroeconomic policies, especially fiscal and monetary, also need to be coordinated.
