Sovereign Credit Rating – A Perspective from Enterprises’ Capital-Raising Needs in the New Era

The importance of the sovereign credit rating for the economy and enterprises

Sovereign credit ratings, assigned by agencies such as S&P, Moody’s and Fitch, reflect a country’s ability to repay debt and its level of risk. The higher the rating, the lower the cost of borrowing and the greater the access to international investors. Conversely, at a “speculative” level, many funds are unable to invest. For enterprises, this also acts as a rating ceiling: when a country is rated low, its enterprises struggle to borrow cheaply. An upgrade therefore helps reduce the cost of capital, expand investment resources and promote sustainable growth.

Vietnam’s improvement to an “investment” credit rating would bring many practical benefits:

• First, lower borrowing costs for the Government and enterprises. When sovereign credit risk falls, investors accept lower interest rates. The experience of emerging markets shows that yields on government and corporate bonds typically decline correspondingly whenever a country is upgraded. This saves the Government budget on debt servicing, while enterprises can raise cheaper capital to expand production and business. For example, after Fitch upgraded Vietnam from BB to BB+ in late 2023, the agency’s assessment pointed to a favourable medium-term economic outlook with high growth and strong foreign direct investment (FDI), helping strengthen Vietnam’s credit metrics. The upgrade reflects the international community’s confidence in macroeconomic stability, thereby improving the general level of lending rates.
• Second, wider access to large investors and diversified funding sources. Many international investment funds — especially pension funds, insurers and global mutual funds — invest only in bonds of countries rated investment grade (BBB-/Baa3 or above). If Vietnam attains investment grade, the vast pools of capital held by these institutions would be ready to flow into the Vietnamese government and corporate bond markets. This not only increases foreign capital but also diversifies the investor base, reducing dependence on a handful of markets or institutions. A high rating also confers prestige and national standing in international financial markets, much as credit upgrades helped Indonesia and the Philippines attract additional portfolio investment inflows in recent years.
• Third, raising the country’s standing and credit profile, creating positive spillover effects on the private sector. When Vietnam attains a higher rating, its sovereign credit standing is reinforced, meaning that the confidence of foreign partners and investors in Vietnam’s business environment is strengthened. This indirectly supports domestic enterprises in raising capital and negotiating with partners. For instance, certain domestic credit-rating agencies may gain greater international recognition, and Vietnamese enterprises may borrow foreign currency with longer tenors. According to Moody’s, a high rating helps improve foreign-currency lending rates for both the public and private sectors, enabling long-term investment projects.
• Fourth, opening up new business and growth opportunities. A high credit rating comes with positive assessments of a stable macro environment and low risk. This can help Vietnam upgrade its stock market (moving into the emerging-market group rather than frontier), attracting strategic investors seeking M&A opportunities and long-term partnerships. More high-quality capital (long-term, low-cost) would take greater interest in Vietnam. More importantly, domestic market sentiment would also improve: enterprises and banks would invest more boldly in long-term projects, and the public would be more willing to place longer-term deposits amid expectations of stable inflation and exchange rates. All of these factors form a virtuous cycle that promotes sustainable growth.
• A further concrete benefit: at investment grade, Vietnam’s foreign-currency rating ceiling would rise, allowing more of the country’s strong enterprises to obtain higher international credit ratings and thus issue international bonds at lower interest rates. Many international financial institutions would also be willing to grant larger credit lines to Vietnamese banks and enterprises as sovereign risk falls. In short, a sovereign upgrade brings multi-dimensional benefits: cost savings, greater access to capital, and an elevated position for Vietnam in international capital markets.

When a single enterprise is upgraded and achieves a high international rating, the effect is already clear; a sovereign upgrade creates far more widespread positive impact — for the entire market. Enterprises would access international capital more easily, attract FDI and expand strategic cooperation. Alongside banks, insurers and fund managers would become supplementary channels for long-term capital, helping to strengthen the financial market. For example, PVI was the first insurer in Vietnam to have its financial-strength rating upgraded by AM Best from B++ (Good) to A- (Excellent), together with an upgrade of its long-term credit rating from “bbb+” (Good) to “a-” (Excellent). Since then, revenue has risen from VND 14,500 billion (2023) to more than VND 21,500 billion (9M 2025), while profit after tax has remained high (above VND 1,000 billion in 2023, VND 880 billion in 2024, and continuing to grow in 2025). At the same time, PVI has expanded its international reinsurance operations and maintained solid returns. This is clear evidence of the effect that improved creditworthiness delivers — not only for the enterprise, but for the whole economy.

Comparison with regional peers: Lessons from Indonesia, the Philippines and Malaysia

Neighbouring countries such as Indonesia, the Philippines and Malaysia have all held investment-grade ratings for many years, allowing them to enjoy substantial benefits in the cost of capital and access to international financial markets. Indonesia is currently rated BBB by S&P and Baa2 by Moody’s — the lowest investment-grade level. The Philippines stands at BBB+ with prospects for a further upgrade. Malaysia holds a high and stable rating in the A- group. Vietnam, meanwhile, remains 1–2 notches lower (BB+/Ba2) and is not yet classified as investment grade.

This gap results in a large difference in borrowing costs: Indonesian enterprises can issue international bonds at 3–5%, whereas Vietnamese firms such as Masan must accept 8–10%. Similarly, Ayala (Philippines) can easily raise cheap long-term capital, while Vietnamese enterprises pay far higher costs. In addition, many investment funds only allocate capital to investment-grade countries, limiting the fundraising opportunities of Vietnamese enterprises despite their strong capabilities.

It is worth noting that Vietnam’s macro indicators are no less impressive: high GDP growth, low public debt (~33–40% of GDP), foreign-exchange reserves of about USD 89 billion (end-2023) and nearly USD 80 billion (early 2025), and good political stability. Nonetheless, according to the rating agencies, Vietnam’s limitations lie in its institutions and the quality of its financial market: low per-capita income, a still-weak banking system, and limited capital-market depth. Events such as the 2022 bond crisis and banking-liquidity strains have all affected assessments of systemic risk.

The lesson from ASEAN is that growth and macro stability are not enough — to be upgraded, Vietnam must demonstrate that investment risk has fallen sustainably, through institutional reform, greater transparency and improved governance quality.

Solutions to improve the sovereign credit rating

To earn higher scores from the rating agencies, Vietnam needs a coordinated strategy to raise the quality of its sovereign credit. Below are some key solutions:

1. Improve the quality of financial reporting and adopt international standards (IFRS) early. The transition to International Financial Reporting Standards (IFRS) in 2025 is an important step to increase the transparency and reliability of national and corporate financial data. At present, Vietnam still uses VAS accounting standards, which differ in many respects, making foreign investors wary because financial statements do not fully reflect the value of assets and liabilities (vietnamnews.vn). IFRS will help Vietnamese enterprises present financial information transparently and directly comparable with global peers, thereby raising their creditworthiness. PwC experts note that adopting IFRS will help enterprises raise international capital at lower cost thanks to enhanced credibility and reliability of financial statements. A Ministry of Finance representative also stressed that IFRS is an inevitable requirement for integration, helping to elevate the stock market and attract foreign investment inflows. Thus, implementing IFRS on the 2025 timeline and encouraging early adoption will be an important foundation for improving transparency scores in the eyes of the rating agencies.
2. Strengthen information transparency and policy-forecasting capacity. Rating agencies place a high value on governments that disclose data transparently and have strong forecasting and risk-management capabilities. Vietnam needs to upgrade the quality of its statistics and publish key economic and financial data (GDP, public debt, foreign-exchange reserves, banking-system health, etc.) promptly and fully. In addition, the macroeconomic analysis and forecasting capacity of bodies such as the Ministry of Finance and the State Bank must be improved to produce appropriate policy scenarios. In discussions with S&P, the Prime Minister asked the agency to share knowledge on credit assessment with Vietnamese authorities to help them understand the steps needed to improve the rating. This shows an awareness of the importance of raising management and forecasting capacity, making macro policy more consistent and credible. One concrete example is transparency in fiscal policy: if Vietnam clearly publishes its medium-term budget strategy, public-debt scenarios and contingency plans for shocks (such as oil prices and exchange rates), the agencies will have a stronger basis for confidence in the country’s ability to control debt and deficits.
3. Reinforce the banking system and financial safety. Vietnam’s banking system has been assessed as a vulnerable link (a “vulnerabilities” point) in S&P’s rating. It is therefore necessary to resolve legacy bad debt decisively, raise capital-adequacy ratios (CAR) to Basel III standards, and improve risk management at banks. The State Bank issued Circular 11/2023 tightening corporate-bond activity and requiring higher provisioning — a positive move. Alongside this, the restructuring of weak banks must be accelerated to reduce the burden of bad debt that could become contingent public debt. Fitch Ratings has praised Vietnam’s maintenance of banking-system stability amid short-term difficulties, with liquidity gradually improving thanks to timely policy responses. Continuing to proactively monitor risk (especially in real estate and corporate bonds) and reinforcing the capital base of large commercial banks will raise the reliability of the financial system and thereby improve the sovereign credit outlook.
4. Reform institutions and improve public-governance effectiveness. This is a “soft” factor but a very important one in the eyes of the rating agencies. Moody’s has emphasised that it would upgrade Vietnam if it sees clear improvement in institutional strength and governance. In recent years, Vietnam has carried out an anti-corruption campaign, streamlined its apparatus and reformed administrative procedures. These efforts must be continued and maintained consistently to build a transparent, fair business environment. Upgrading the legal framework (for example, the Land Law, the Public Investment Law and the amended Securities Law) towards international standards will help reduce risk for investors. Experts also recommend that the Government promote the socialisation of infrastructure investment and transparent public-private partnerships (PPP) to both address the capital challenge and improve the quality of public services. Information from Moody’s suggests that administrative reforms accelerated from 2024 under new leadership are helping to streamline procedures and improve governance effectiveness. This is a positive signal to be built upon in order to raise institutional scores — a pillar where Vietnam still has room to improve relative to regional peers.
5. Stabilise the exchange rate and control inflation, reinforcing policy “buffers”. A stable exchange rate and inflation are crucial to reinforcing the confidence of investors and rating agencies. In 2022, when the VND came under depreciation pressure, the State Bank sold a large volume of foreign-exchange reserves to stabilise the situation. As a result, the exchange rate quickly stabilised in 2023 and reserves recovered to nearly USD 90 billion. Flexible but prudent monetary policy must continue, keeping inflation at the target (~4%) and preventing sharp exchange-rate swings. In parallel, policy space for monetary and fiscal policy should be rebuilt: raising foreign-exchange reserves to above three months of imports, keeping the budget deficit around 3% of GDP (2024–2025 may be somewhat higher but needs a gradual reduction path), and keeping public debt below the 60%-of-GDP threshold. When Vietnam has sufficiently strong fiscal and monetary buffers (large reserves, low public debt, a healthy budget), the risk of default or crisis becomes very small — the basis on which agencies raise credit scores.

In short, improving Vietnam’s sovereign creditworthiness requires coordinated efforts, from refining data, information transparency and higher reporting standards, to institutional reform and the strengthening of the financial-banking sector. In recent engagements, the Vietnamese Government has clearly shown its determination to secure an upgrade, treating it as a national priority in pursuit of fast and sustainable growth. If the above solutions are implemented effectively, attaining an “investment grade” rating before 2030 is an entirely feasible goal.

Conclusion

The sovereign credit rating is not merely an indicator of financial standing but also a key to expanding access to capital and reducing borrowing costs for both the Government and enterprises. At investment grade, Vietnam would be positioned to attract high-quality long-term capital and promote sustainable growth. To achieve this, improving institutional quality, transparency and effective governance is decisive. In an era of global competition for capital, the credit rating is a country’s “financial passport,” reflecting its readiness for development and integration.

References:

• A.M. Best (2023). AM Best Upgrades Credit Ratings of PVI Insurance Corporation. Available at: https://news.ambest.com
• Bao Tram (2025). IFRS: Opportunities and challenges for Vietnamese businesses. VOV World, 1 August. Available at: https://vovworld.vn
• BusinessWorld Online (Chan, K.K.) (2025). PHL gets “verbal” assurances from Fitch, Moody’s on outlook, 28 October. Available at: https://bworldonline.com
• Investing.com (2025). Vietnam’s Ba2 rating affirmed by Moody’s, stable outlook, 6 December. Available at: https://investing.com
• Mekong ASEAN (2024). PVI raises charter capital to VND 3,500 billion, reinforcing its position in the non-life market. Available at: https://mekongasean.vn
• PVI Holdings (2023). Annual Report 2023. Available at: https://www.pvi.com.vn
• PVI Holdings (2025). Business results for the first nine months of 2025. Available at: https://www.pvi.com.vn
• OJK Indonesia (2025). Updates on Indonesia’s Sovereign Credit Rating (March 2025). Available at: https://iru.ojk.go.id
• S&P Global Ratings (summarised by Tri Duc) (2024). S&P affirms Vietnam’s long-term rating at BB+, outlook stable. The Investor, 22 June. Available at: https://theinvestor.vn
• Santos, K. (2009). Corporate credit ratings: a quick guide. The Treasurer’s Companion. Association of Corporate Treasurers. Available at: https://treasurers.org
• Vietnam News Agency (2023). Fitch upgrades Vietnam to “BB+”, outlook Stable. VietnamPlus, 8 December. Available at: https://en.vietnamplus.vn
• VnExpress (2025). Prime Minister urges S&P to consider upgrading Vietnam’s credit rating, 4 March. Available at: https://timvest.ch
• Fireside Chat (2025). Vietnam’s Economic Outlook and Sovereign Rating (S&P Ratings).

Author:

• Trinh Quynh Giao, Chief Executive Officer, PVI Asset Management JSC
• Nguyen Thu Binh, Head of Risk Management, PVI Asset Management JSC

Source: Dau tu Chung khoan