Vietnam’s Bad Debt Problem

Vietnam’s commission that supervises national finances says a third of the country’s commercial banks are “critically injured” by bad debts — and half of those non-performing loans were hidden in the banks’ financial reports.  The total of bad loans held by banks is said to be $12 billion, or about 10% of their aggregate loan portfolio.

Technically, the commercial banking system could be considered bankrupt — because of bad loans to state-owned corporations, real estate projects, and importers.

This loan situation may be the biggest current problem for Vietnam’s government now that the country has tamed last year’s runaway inflation.  Total credit in Vietnam’s economy appears to be more than 100% of GDP — about $125 billion.  Reforms in the banking system are underway as an effort to control the debt problem.

More on Vietnam’s bankrupt banks

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