Fitch Ratings announced an upgrade of Vietnam's long-term senior secured debt rating to BBB- from the previous BB+ level, removing the rating from its Under Criteria Observation status. This change results from the agency’s adoption of new Sovereign Rating Criteria effective from September 2025, which for the first time incorporate recovery assumptions directly into sovereign debt ratings.
The upgraded instruments include the 30-year Brady Bonds that were originally issued on March 12, 1998. These bonds have notable collateral arrangements: the Discount Bond’s principal is fully secured at maturity by US Treasury zero-coupon bonds, while the Par Bond enjoys 50% collateral backing. Both bond types feature rolling interest collateral, enhancing their secured status.
Although these secured debt ratings have improved, Vietnam’s Long-Term Foreign Currency Issuer Default Rating (LT FC IDR) remains at BB+ with a Stable Outlook. Fitch reaffirmed this rating on June 20, 2025.
Fitch also highlighted Vietnam’s Environmental, Social, and Governance (ESG) Relevance Scores, granting the country a score of 5 in areas concerning Political Stability and Rights, Rule of Law, Institutional and Regulatory Quality, and Control of Corruption. Vietnam's position in the 41st percentile on the World Bank’s Governance Indicators reveals limited political participation rights, alongside moderate institutional capabilities, rule of law enforcement, and corruption levels.
The rating agency flagged specific factors that could trigger a downgrade, such as significant drops in foreign exchange reserves or notable increases in fiscal deficits. Conversely, Vietnam could achieve further upgrades if it sustains robust growth without escalating economic vulnerabilities and succeeds in substantially lowering fiscal risks.
This rating development reflects an evolving analytical framework that better captures recovery prospects for secured sovereign debt, providing greater differentiation within Vietnam’s debt profile.
Fitch Ratings has raised Vietnam’s long-term senior secured debt rating to BBB- from BB+, moving it out of Under Criteria Observation. This upgrade is based on Fitch’s revised Sovereign Rating Criteria implemented in September 2025, which now incorporates recovery assumptions into sovereign debt evaluations. The rating adjustment specifically affects the 30-year Brady Bonds issued in 1998, distinguished by their collateral structures. While Vietnam’s long-term foreign currency issuer default rating remains at BB+ with a Stable Outlook, Fitch identifies potential risks and growth opportunities tied to fiscal and economic variables, alongside governance considerations reflected in the country’s ESG relevance scores.
Key Points
- Fitch Ratings upgraded Vietnam’s long-term senior secured debt rating to BBB- from BB+, removing it from Under Criteria Observation following new sovereign rating standards.
- The upgrade applies to Vietnam's 30-year Brady Bonds, which feature unique collateral structures including full and partial US Treasury zero-coupon bond backing.
- Vietnam’s Long-Term Foreign Currency Issuer Default Rating remains at BB+ with a Stable Outlook, while ESG assessments highlight moderate governance strengths and political challenges.
Risks
- A sharp decline in Vietnam’s foreign exchange reserves could prompt a downgrade of its credit ratings.
- Significant increases in fiscal deficits pose a risk to Vietnam’s sovereign credit outlook.
- Governance concerns, such as low political participation rights and issues with corruption control, could impact economic stability and creditworthiness.