Research On Effect Of External Debt On Economic Growth Of Vietnam

After economic reforms of Vietnam in1986, there’s rapid economic development inVietnam, and macroeconomic was more stable. The scale of the external debt also hasexpanded. Because the external debt is closely related to economic growth in Vietnam, so thispaper aims to explore the causality between external debt and economic growth in Vietnam.This paper gathered the data to analyze the impact of external debt scale on Vietnam’seconomic. Vietnam’s external debt increased year by year, promoted by the development ofpillar industries and infrastructure construction in Vietnam. But to some extent it alsorestricted the economic development of Vietnam. The ratio of reserves to total external debt isat the level of0.2-0.5. And the debt repayment capacity is weak. The increasing debt pressurehas lead to Vietnam’s inefficient use of capital, high inflation, the government’s fiscal deficitsurged. Simultaneously, by selecting the1994-2011Vietnam’s GDP, external debt, economicopenness, import and export trade and other economic variables related to a series of data,after the empirical analysis, this paper found that the total external debt and domesticinvestment in Vietnam was the two largest variables impact on economic growth in Vietnam.Finally, based on the empirical results, this paper discuss about the policies to improve themanagement of Vietnam’s external debt.