Vietnam unlikely to receive concessional loans from ADB in a few years

By Toan Dao June 17, 2016 | 04:16 am PT

The Asian Development Bank (ADB) is considering gradually moving Vietnam to another group of developing countries in its criteria for loans, which means the nation will no longer receive concessional loans from the bank in a few years ahead.

ADB’s loans for developing member countries in Asia and the Pacific are financed from its Asian Development Fund (ADF), or concessional loans, and ordinary capital resources (OCR) or non-concessional loans, ADB President Takehiko Nakao said in a press briefing in Hanoi on Friday.

Countries under ADF are poorer ones, such as Laos, Cambodia, Myanmar, Afghanistan and Nepal. They will get loans on concessional terms (long maturities, lower interest rates) as well as grants while those under OCR will receive loans provided to middle-income countries at a quasi-market rate.

vietnam-unlikely-to-receive-concessional-loans-from-adb-in-a-few-years

ADB President Takehiko Nakao (R) in the press briefing on June 17. Photo by Reuters/Kham

There are also countries which receive loans from both sources and Vietnam is one of them, along with Armenia, Bangladesh, Georgia, India, Federated States of Micronesia, Mongolia, Pakistan, Palau, Papua New Guinea, Sri Lanka, Timor-Leste, and Uzbekistan.

But given Vietnam’s higher gross national income (GNI) per capita and creditworthiness, it will be lifted to the other group of developing countries, according to ADB’s criteria.

Vietnam’s GNI per capita stood at more than $2,000, almost double the requirement for concessional lending, Nakao said.

“We must consider [moving] the graduation of Vietnam from concessional lending in a couple of years. That would be discussed with the authorities. But based on our lending volume, we are sure that we will continue to lend to Vietnam because we have resources now to do it,” Nakao said.

If the final decision is made, Vietnam will be moved to Group C, which also includes Azerbaijan, People’s Republic of China, Cook Islands, Fiji, Indonesia, Kazakhstan, Malaysia, Philippines, Thailand, and Turkmenistan.

Nakeo, however, expects that even after Vietnam is in Group C in the coming years, loans from ADB to the country will be kept at around $1 billion as before.

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