Vietnam eyes tightening foreign aid to curb public debt

By Toan Dao   June 14, 2016 | 08:15 am GMT+7

Ministry of Finance has requested state agencies to submit reports on their use of official development assistance (ODA) and other preferential loans in an attempt to keep loans at "safe level". 

The request follows a direction from Prime Minister Nguyen Xuan Phuc in order to prevent public debt from rising over 2016-2020, a statement posted on the government portal on Monday showed.

The ministries, provinces, cities, the Vietnam Development Bank, the Vietnam Bank for Social Policies, state-owned companies which use ODA, are required to review their ODA-funded programs and projects over 2011-2015. The review of each program or project must include details about total project cost, ODA loan value, time frame for implementation of the program or project, the donor, the adjusted loan value, if any and the disbursement on yearly basis.

An employee counts U.S. dollar bank -notes near Vietnamese dong bank-notes at a bank in Hanoi. Photo by Reuters/Kham

An employee counts U.S. dollar bank -notes near Vietnamese dong bank-notes at a bank in Hanoi. Photo by Reuters/Kham

They have also been asked to evaluate the implications from the ODA-funded programs or projects to the socio-economic development, point out shortcomings during the use and payment of ODA and analyze responsibilities of the ministries, provinces, cities and other government’s entities for any shortcomings.

For the 2016-2020 period, the Finance Ministry wants the ODA users to provide information about their ongoing and approved ODA-funded programs or projects in the period. They must show clearly the preparations as well as the negotiation process with the donors to implement the approved programs or projects.

In particular, the ministry has asked the ODA users to build disbursement plans for each program or project on yearly basis which must be relevant to loan agreements and the implementation of each program or project. The disbursement plans must prove if the program or project is of the basic infrastructure or is qualified to borrow from the government’s loans.

In 2015, Vietnam's public debt reached a record high 62.2 percent of GDP; a significant increase in the short time given the ratio was only 38 percent in 2011, according to the State Bank of Vietnam. In a nutshell, Vietnam's public debt rose 20 percent per year from 2010-2014.

This may have stayed within the National Assembly’s cap of 65 percent, but the public debt ratio has risen quickly with ineffective investments causing huge losses.

According to government data, the country's national debt ratios from 2011-2015 are as follows:

  Public debt Government debt Foreign debt
2015 62.2% 50.3% 43.1%
2011 50% 39.3% 37.9%

Related news:

> PM: Vietnam has disbursed only 70 percent of pledged ODA

> Six priority sectors for ODA effective since May

> Vietnam needs $39.5 billion from ODA during 2016-2020

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