Preferential ODA loans to be cut off from July 2017

Update: March, 23/2016 - 11:04

Nhat Tan Bridge is funded by ODA capital of Japan. File Photo

H NI (VNS) From July 2017, Vit Nam would no longer receive preferential loans
in the form of official development assistance (ODA), a finance department official said
at a conference yesterday.
Instead, the country could be provided only preferential loans and gradually marketbased financing, Trng Hng Long, head of the Ministry of Finances Department of
Debt Management and External Finance said at the conference on the ODA relending
polices.
Vit Nam was working with the World Bank and other organisations on the roadmap of
repayment of official development assistance (ODA) to prevent shocks to the State
budget when interest rates on existing ODA increased or repayment period was
shortened, heard a conference yesterday.

Long said that concessional terms of preferential loans provided to Vit Nam gradually
became stricter as the country turned into a middle-income country since 2010.
Long said that interest rates on existing ODA would be increased to between 2 per cent
and 3.5 per cent, from below 1 per cent per year or the repayment period should be
shortened by half as the country needs to implement rapid debt repayment obligation
after providing of the ODA.
Before 2010, average repayment period was around 30 years to 40 years with
borrowing costs between 0.7 and 0.8 per cent per year, including a grace period. In
comparison, the average repayment period was between 10 years and 20 years and
borrowing cost was from 2 per cent during the 2011 to 2015 period.
The finance ministry said it was working with the World Bank, a major donor to Vit
Nam, and other organisations about ODA repayments to prevent negative impacts to
the State budget. The negotiations are underway, Long said.
Repayment pressure
As negotiations for ODA repayment were underway, Long said that he could not give
an exact amount of the public debts Vit Nam had to pay by 2020.
He said that debt repayment pressure would be the heaviest in 2022 to 2025 period, so
the pressure would not be huge in the next four years.
Long said that payables this year would account for around 14.7 per cent of the total
budget collection, or VN150 trillion (US$6.7 billion).
Statistics from the finance ministry showed that Vit Nam received US$45 billion worth
of ODA between 2005 and 2020.
The finance ministry said that ODA contributed to the countrys socio-economic
development and on improving the infrastructure system. However, while the credit
risks were still put on the shoulder of the State budget, the management and use of
ODA sometimes were inefficient.
Long said that from now to July 2017, Vit Nam must take advantage of the ODA to
invest in development of the infrastructure system.
In order to enhance the efficiency of the ODA management and use, Long said that the
relending mechanism might be applied at localities with a better financial situation to
share the public debt pressure with the State budget. VNS

TAGS: Viet Nam, 2017 , no ODA , conference