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Oct 26, 2016 / 16:29

Improving the efficient use and management of ODA loans

The Ministry of Finance said on October 25 that the Official Development Assistance (ODA) loans have significantly contributed to socio-economic development, however, in the coming time, ODA loans must be used more carefully as preferential loans from development partners are reducing considerably.

According to the report of the Ministry of Finance, in the period 2005 - 2015, the total of ODA and concessional loans committed to Vietnam reached about 45 billion USD.  Most of the capital has been focused on the support to balance financial macroeconomic, investing in infrastructure development and social economy and poverty alleviation, contributing to socio-economic development.
The Ministry of Finance said after Vietnam reached a lower-middle-income country in 2010, preferential loans from development partners have reduced considerably. 

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Before 2010, the average repayment period was about 30 years to 40 years with borrowing costs between 0.7 and 0.8 percent per year, including a grace period. From 2011-2015, the repayment period averaged 10 - 25 years with borrowing costs from 2 percent. 
Hoang Hai, Deputy Director of Department of Debt Management and External Finance under the Finance Ministry said that Vietnam may no longer benefit from ODA loans from July 2017. It will be provided with only preferential loans and loans under market-based conditions. 
The repayment period of existing ODA loans will be reduced by half or interest rates will be increased to 2-3.5 percent a year, he added. 
About 1 billion USD from the State budget is spent for foreign loan and interest repayments every year, the official said.
He also said ODA loans have significantly contributed to socio-economic development. However, the public has raised concerns about the use of the loans. 
ODA loans must be used more carefully, Hai added. 
The Government recently has issued a directive on using foreign loans more effectively. Under the directive, public debt must be used for only development investment and building important socio-economic facilities.
The Government will also increase re-payments of foreign loans from localities and cut down free provision of the funds.
The Ministry of Planning and Investment said as of September 2016, over 4.9 billion USD of ODA and concessional loans were committed to Vietnam.
The projects mainly focus on transport, water supply and sewage, environmental hygiene, urban development and climate change response.