About 14.7 percent of the State budget revenue, or VND 150 trillion (US$6.7 billion), will be spent on paying debt in 2016, the Ministry of Finance (MoF) revealed on March 22.
|Illustrative photo (Source:VNA)|
The MoF reported that about $45 billion in official development assistance (ODA) and concessional loans was promised from 2005 to 2015. One-third of that sum was channeled into the State budget which in turn was allocated for certain programmes and projects. Another one-third was earmarked for local programmes and projects, while the remaining served as loans for the State’s key projects.
Foreign ODA and preferential loans for development investment have given a facelift to Vietnam’s socio-economic infrastructure. They were focused on such key areas as transport, energy, water supply and drainage, environment, climate change and poverty alleviation, the ministry noted.
However, up to 92.2 percent of local programmes’ and projects’ capital was totally sponsored by the State budget, only 7.8 percent was loaned by the budget. That has led to an array of problems such as the ineffective spending of loans, projects’ sluggish progress and the augmentation of investment capital.
The State budget’s long-standing sponsorship for local projects has encouraged the reliance on the State and discouraged projects’ managers from using the provided money in a frugal and effective manner.
Truong Hung Long, Director of the MoF’s Department of Debt Management and External Finance, said Vietnam is likely to no longer benefit from ODA loans from May 2017, but have to mainly use loans with concessional terms. It will gradually have to receive commercial loans.
Regarding already borrowed ODA, the debt payment deadlines might be shortened by half or interest rates can be raised to 2 – 3.5 percent, he noted.
To capitalise on foreign loans, he asked State agencies to focus ODA capital on critical fields and projects and reduce the State budget’s provision. Localities with good financial strength should share the debt burden with the State budget. Meanwhile, projects that can be financed by other sources should call for non-State funding.
The official also urged for enhanced transparency in the management and use of public loans, with more of a sense of responsibility by the parties concerned in loan management and use.