Moody's placed Vietnam's Ba3 local and foreign currency issuer and senior unsecured ratings under review for downgrade, citing the country's "institutional weaknesses" as manifested by delayed payments on a government obligation.
The rating agency said the coordination gaps within the government that led to the payment delays suggest that Vietnam's creditworthiness may no longer be consistent with the country's current sovereign rating.
"These weaknesses seem to reflect deficient coordination and planning among various arms of the government, with a degree of opacity around the decisions and actions needed to meet some of the government's obligations; and complex bureaucratic processes that can obstruct the smooth and timely payment of government obligations," Moody's said.
During the review period, Moody's said it would determine if the institutional weaknesses increase the risk of payments being delayed or missed in the future. It would also look into the practices and systems that the government has put in place to ensure timely payments.
In announcing the ratings action, Moody's also cited environmental risks that are "material" to Vietnam's sovereign rating.
"[Vietnam's] credit profile is exposed to climate change risks because of the magnitude and frequency of economically disruptive climate events, combined with the limited fiscal space to mitigate the impact of such events when they occur," the rating agency said.
