Since coming to power in August 2024, General Secretary To Lam has emphasised his ambition to turn Vietnam into a high-income country by 2045. Towards this goal, a National Assembly resolution in April set a target of average annual growth of 10 per cent through 2030, with infrastructure building expected to serve as a major growth engine.

However, Vietnam is struggling to mobilise sufficient capital to finance this ambitious agenda because of both domestic and external constraints. Hanoi therefore faces a choice: align its growth targets with the capital it can raise at a reasonable cost or accept considerably greater economic risks.

The projects illustrate the scale of the challenge. The North–South high-speed railway is projected to cost US$67 billion, while the two Ninh Thuan nuclear power plants, with a combined capacity of 4,000 megawatts, are expected to cost at least US$22 billion. Financing Vietnam’s high-growth plans for 2026–2030 is estimated to require about US$297 billion annually, or 40 per cent of nominal GDP.

Domestic banks carry most of this burden. Bank lending accounts for about 83 per cent of Vietnam’s financing mix, compared with 13 per cent for bonds and 4 per cent for equity. By late June, outstanding credit reached 19,970 trillion Vietnamese dong (US$760 billion), up 18.1 per cent year on year. Credit expanded by 7.41 per cent in the first half, while deposits grew by only 5.02 per cent, pushing the loan-to-deposit ratio to about 112 per cent.

Banks have responded by competing more aggressively for funding. Posted six- to 12-month deposit rates are generally 5.0 per cent to 6.5 per cent, in line with the State Bank of Vietnam’s efforts to keep rates low. In practice, however, depositors are reportedly offered effective yields of 8.5 per cent to 11.0 per cent through private negotiations.

Scarce credit is also distributed unevenly. In June, 18 major projects requiring 752 trillion dong were exempted from standard credit-growth limits. Developers include large and well-connected conglomerates like Vingroup, Sun Group and Masterise. By contrast, small and medium-sized enterprises (SMEs), which account for 98 per cent of Vietnamese firms, receive only about 20 per cent of bank credit. They face lending rates of 10 per cent to 12 per cent, while 93.5 per cent of loans require collateral. Yet SMEs account for most employment and household incomes.

The strain is already visible: new business registrations fell 13.9 per cent year on year in July, while completed dissolutions rose by 270 per cent. This writer’s recent field trip to Hanoi and Ho Chi Minh City revealed that many SMEs are struggling because they cannot access the credit needed to sustain or expand operations. This is happening despite stellar headline GDP growth of 9 per cent in the first nine months of 2026.

High interest rates have brought the property market close to a standstill. Average home-loan rates have reached 14 per cent to 16 per cent, while the number of residential property transactions nationwide fell by 36 per cent year on year in the first half. This has cooled speculation and reduced the risk of a property bubble.

However, the high rates have also created new vulnerabilities. Developers depend heavily on property sales for cash flow, while their average bond issuance rate has risen to 11.4 per cent, and their debt-to-equity ratio has climbed to 74 per cent, against an average of 54 per cent during 2022 to 2025. Disrupted cash flows increase the risk that repayment difficulties will translate into higher bank bad debt. As China’s experience illustrates, a prolonged property slowdown can also weigh on household confidence, consumption, public finance and economic performance.

The logical response is to look abroad, but external options remain limited. The international financial centres in Da Nang and Ho Chi Minh City, launched in January and February, have issued certificates to only a few dozen investors, while credit-rating requirements exclude some major foreign banks. Sovereign bond issuance is constrained by Vietnam’s credit rating, which is one notch below investment grade from S&P and Fitch and two from Moody’s.

The government aims to achieve investment-grade status by 2030, which analysts estimate could cut borrowing costs by as much as 1.5 percentage points. But that benefit would come too late for many projects beginning now.

International capital markets are also becoming less welcoming to Vietnamese firms and banks. The US 10-year Treasury yield is about 5 per cent, while the Federal Reserve raised its target range to 3.75 per cent to 4 per cent in September. Surging global demand for capital, particularly to finance AI and related technologies, is intensifying competition for funding. Meanwhile, geopolitical pressures, including the US-led war against Iran and the Russia-Ukraine conflict, are pushing up the risk premium that emerging markets like Vietnam must pay. There are three key implications here.

First, Vietnam may need to align its growth ambitions with what it can finance at a reasonable cost, to ease funding pressures and put expansion on a more sustainable footing.

Second, if Hanoi maintains its targets while domestic interest rates remain high, the wider economy will bear the strain, with SMEs likely to feel it first. High borrowing costs could produce more closures and discourage private investment, leaving the economy more fragile even as infrastructure spending sustains headline GDP growth.

Third, Vietnam will increasingly need international funding, creating opportunities for foreign banks and other credit institutions. But greater reliance on debt carries risks. Much public infrastructure does not generate direct returns sufficient to service the borrowing used to fund it. In an environment of prolonged high interest rates, excessive debt-financed investment could weaken the repayment capacity of both the government and Vietnamese enterprises.

Vietnam can still build the roads, railways, airports and energy infrastructure it needs, but not necessarily at the pace envisaged. Ambition must be matched by affordable capital, and the two are increasingly moving apart. A more calibrated growth target would reduce financing pressures and the risk of a costlier debt adjustment later.