Vietnam Table of Contents
Vietnam is one of only two communist countries--the Democratic People's Republic of Korea (North Korea) is the other- -to default on its international debts. Vietnam's scheduled 1982 payments to Western creditors were estimated at US$260 million, well over the US$182 million value of Vietnam's exports that year to noncommunist countries with hard, or convertible, currencies. The Soviets cancelled some US$450 million of Vietnam's debts in 1975 and began a program of grant aid. As Vietnam-Comecon trade expanded in the 1980s, however, so did Vietnamese debts to Comecon countries. Comecon funds for project assistance and related equipment often were wasted because of mismanagement or remained frozen for years in projects not scheduled to become productive until the middle or late 1980s. Projected exports frequently fell short of expectations, widening trade deficits and requiring additional balance-of-payments aid. Taking the long view, the Soviet Union shifted its assistance during the Third Five-Year Plan to concessionary loans, repayable at 2 percent interest over a period of 20 to 30 years.
As Vietnam's international debt grew steadily through the 1980s, the debt owed to the Soviet Union and other Comecon countries accounted for larger portions of the total foreign debt. In 1982, according to estimates by the Organization for Economic Cooperation and Development (OECD), Vietnam's total foreign debt was US$2.8 billion. Of this debt, US$1.7 billion, or 60 percent, was owed to OECD member countries (advanced industrial Western countries) and their capital markets or to multilateral lenders. A large portion of Vietnam's international debt covered the balance of payments deficit with Comecon countries (see Foreign Economic Assistance , this ch.). In 1987 Le Hoang, deputy director of the State Bank of Vietnam, told a Western correspondent that the country owed between US$5.5 and US$6 billion to Comecon member countries. Hoang stated that Vietnam's debts (both official and private) to hard-currency countries were about US$1 billion.
Creditors in convertible-currency areas included international organizations such as the IMF and the Asian Development Bank; national creditors such as Belgium, Denmark, France, India, Japan, and the Netherlands; and private creditors in numerous Western countries. In January 1985, the IMF suspended further credit when Vietnam failed to meet a repayment schedule on the amount owed to the fund. Talks to reschedule this obligation again failed in 1987, making Vietnam ineligible for fresh funding. In 1987 Vietnam owed the fund some US$90 million. Its foreign exchange reserves in 1985 had been estimated at less than US$20 million.
Data as of December 1987