Massive funding needs stretch the limits of bank lending

In April 2026, the Vietnamese parliament approved a resolution on the five-year socio-economic development plan for 2026-2030, setting a target of average annual GDP growth of at least 10%.

To achieve this goal, total society's investment over the period is projected at around VND38,500 trillion ($1.49 trillion), roughly double the level recorded in the previous five-year period.

This translates into an annual funding requirement of about VND7,700 trillion ($298.05 billion), equivalent to 40% of nominal GDP. Public investment is expected to average around VND1,600 trillion ($61.93 billion) a year, accounting for less than 22% of total capital needs. The remaining 78% will have to come from the private domestic sector, foreign direct investment (FDI) and the financial system, according to estimates by VIS Ratings.

Meanwhile, outstanding bank credit had reached around 146% of GDP by the end of 2025, putting Vietnam among the most highly leveraged banking markets in ASEAN. The World Bank has warned that rapid credit growth is increasing risks to the financial system, stressing the need to maintain prudent lending standards and closely monitor credit quality.

These figures highlight the limits of a growth model that relies primarily on bank financing, particularly as the economy requires long-term capital for transport infrastructure, energy, logistics and large-scale investment projects.

On the stock market, total capital raised through share and bond issuance reached VND731.6 trillion ($28.32 billion) in the first nine months of 2026, up 85.6% from a year earlier, according to the Ministry of Finance. Despite the strong growth, the amount remains modest compared with annual funding needs of around VND7,700 trillion ($298.05 billion).

Dr. Can Van Luc, chief economist at state-controlled bank BIDV, also noted that bank credit currently supplies about 51% of the economy’s total funding and is expected to account for an even larger share. Meanwhile, capital mobilized through the capital markets, including equities, corporate bonds and government bonds, meets only around 23% of funding needs.

Household savings represent another potential source of financing. Before 2026, Vietnam’s savings rate averaged around 35% of GDP, exceeding the actual investment rate of approximately 31% and creating a gap of four percentage points of GDP, according to Luc. However, the savings rate is forecast to decline to around 33% of GDP in 2026, suggesting that the scope for mobilizing domestic resources also warrants a more cautious assessment.

Public debt has headroom, but the investor base must expand

As funding needs rise, Vietnam’s public debt remains below the safety thresholds set by the National Assembly, the country's legislature. Government estimates put public debt at around 35-36% of GDP at the end of 2025, government debt at 33-34% and external debt at 31-32%. Compared with the respective ceilings of around 60%, 50% and 50% of GDP for 2026-2030, these figures indicate that Vietnam still has room to borrow.

Nguyen Quang Thuan, co-founder, chairman and CEO of FiinGroup, said the country's relatively safe public debt levels gave the government scope to consider additional borrowing to support development goals. Funding could be raised in both domestic and international markets.

Domestically, Vietnam has established a foundation for government bond issuance and trading. However, the investor base remains concentrated among banks, insurance companies and Vietnam Social Security, while foreign investors account for only around 0.1% of outstanding local-currency government bonds.

This structure has a positive aspect: it helps sustain relatively stable domestic demand and supports low bond issuance yields. But as Vietnam seeks to expand the market and diversify its investor base, attracting new sources of capital will become increasingly challenging.

Thuan said that with yields on 10-year government bonds recently hovering around 4%, after previously standing at just above 3%, investors might consider alternatives such as bank deposits if they offer more attractive returns. The government therefore needs to strike a balance between accelerating market reforms, broadening the investor base and allowing market forces to play a greater role in order to raise capital efficiently while keeping public debt under control.

In international markets, Vietnam also faces challenges related to its sovereign credit rating, credit conditions and global interest rates. With yields on five-year U.S. Treasury bonds, denominated in U.S. dollars, rising to around 5%, international borrowing costs are also coming under pressure.

Market reforms should not wait for interest rates to fall

Thuan said Vietnam should not delay necessary reforms simply because interest rates remain high. Improving the sovereign credit rating and developing the capital markets should be treated as long-term strategic priorities, rather than measures to be pursued only when immediate funding needs arise.

Maybank Investment Bank (MSVN) said Vietnam could achieve a structural reduction in foreign borrowing costs by securing an investment-grade sovereign credit rating, even as global borrowing costs remain elevated for an extended period. Based on previous rating upgrades, foreign borrowing costs could fall by around 150-250 basis points, it said.

MSVN expects the government to make achieving investment-grade sovereign status a top priority and accelerate the process as early as 2027. One proposed measure is to establish a dedicated sovereign credit rating task force, performing functions similar to those of investor relations (IR) teams at companies. The body would provide credit rating agencies with comprehensive and accurate information on Vietnam’s macroeconomic conditions and development plans.

Such reforms would not only expand the government's funding capacity but also help strengthen the capital markets. The government bond market, in particular, plays a foundational role in establishing a benchmark yield curve and pricing other debt instruments.

Thuan said mutual funds, sovereign wealth funds, international funds and development finance institutions were all interested in whether Vietnam could establish a sufficiently reliable benchmark yield curve. Without a credible reference rate derived from government bonds, companies would find it difficult to determine appropriate funding costs that reflect the risk profiles of their projects when seeking capital in international markets.

Once this foundation is in place, international investors would be better positioned not only to participate in overseas issuances of Vietnamese bonds denominated in foreign currencies, but also to increase their investments in local-currency bonds. "This is also a path taken by some countries in the region. For Vietnam, attracting international investors to the local-currency bond market could diversify demand while reducing reliance on foreign-currency borrowing and the associated risks from exchange-rate fluctuations," the FiinGroup chairman said.

International capital raising needs to be part of a broader strategy to develop domestic capital markets, broaden the investor base and improve creditworthiness. By establishing more channels for raising long-term capital at reasonable costs, Vietnam can ease pressure on its banking system while mobilizing resources for infrastructure projects and new growth drivers.

The challenge is not simply to find additional funding, but to build a financial structure capable of supporting Vietnam’s ambition to achieve double-digit growth in 2026-2030.