Like other Asian countries with asset bubbles inflated by foreign money, the Vietnamese authorities pushed up interest rates – making it all the harder for it now to change course. The usual caveats apply: the proposed $6bn stimulus package and other spending will stretch over several years and include projects already on the table. Even so, this is a big bite for a country with fiscal revenues worth less than 25 per cent of GDP and budget deficits consistently over 2 per cent of GDP.
Funding the package will mean issuing more debt. Vietnam tapped global markets for $750m in 2005, but back then it was a hot emerging market – not another bedraggled casualty of a global crisis. Indonesia paid up for its $3bn bond last month; Vietnam, similarly rated but with a worse outlook, would need to trump the former's 11.75 per cent yield.
Domestic issuance of magnitude, too, is tricky: banks, for example, already lend out more than their deposit base. If poor countries cannot fund themselves, richer brethren will find themselves on the hook for their collateral damage. Donor countries, the International Monetary Fund has warned, might have to stump up an additional $25bn for the 22 poorest countries under a best-case scenario; in the event of continued deterioration that rises to $140bn. What goes around, comes around.