02:37 (GMT +7) - Monday 21/08/2017

Vietnam Today

PM: 2017 ODA disbursement must reach target

Released at: 10:45, 03/08/2017

PM: 2017 ODA disbursement must reach target

PM Nguyen Xuan Phuc. Photo: VGP

Prime Minister tells August 1 government meeting that ministries, authorities, and provinces must reach $4.6 billion target set for this year.

by Duy Anh

Declining disbursement of official development assistance (ODA) capital and concessional loans will be turned around after Prime Minister Nguyen Xuan Phuc told an August 1 government meeting that ministries, authorities, and provinces must reach the $4.6 billion target set for this year.

Only $1.5 billion, or 33 per cent of the annual plan, was disbursed in the first half of the year, according to figures from the Ministry of Planning and Investment (MPI), with inadequate capacity of contractors, time-consuming land clearance processes, and poor management identified as obstacles dragging down the disbursement rate.

“All of the signed ODA capital and concessional loans must be disbursed on schedule,” he said, adding that each project owner must review their capacity and responsibility and withdraw or seek other funding sources if their competence is lacking.

He ordered MPI to review ODA projects and prioritize those that will be completed in 2017, while the Ministry of Finance will work with agencies and donors to adjust loan conditions to raise competitiveness in selecting contractors, to prevent appointing those with low capacity, as happened in the case of the Cat Linh - Ha Dong urban railway project in Hanoi. 

The Prime Minister also said it was essential to cut project approval procedures and empower ministries and agencies to transfer capital between projects in line with current regulations.

Stricter supervision of projects using ODA capital and concessional loans, particularly those that end in 2017-2018, must be undertaken, with no extension of deadlines permitted. Increases to investment capital for subjective reasons will also be limited.

“All projects that exceed investment estimates must be examined to avoid delays,” he emphasized. The attraction of ODA capital and concessional loans for 2018 and three-year financial plans will also have to be mapped out, but top priority remains the completion of disbursement this year.

Since 1993, when Vietnam resumed relations with international donors, it had inked agreements on non-refundable loans and aid worth some $82.61 billion as at June 30.

By the end of June, 810 programs and projects were being implemented with total undisbursed capital of about $21.17 billion. The sum will be disbursed from now through 2026 under agreements’ schedules, but most of the sum, $17.49 billion, is set to be disbursed between 2017 and 2020.

Chronically low disbursement has long hiked the cost of ODA-funded projects in Vietnam and increased the burden on debt servicing. On average, a project one year behind schedule will cost 17 per cent more than initially expected, while those delayed by two or three years will be 1.5 times higher than projected.

Official figures show that Vietnam relies heavily on ODA loans with preferential conditions, which currently account for 98 per cent of the country’s total external debts, with an average maturity of ten years and interest rates of only 1 to 1.5 per cent per annum.

Prior to 2010, the average repayment period was around 30 to 40 years with borrowing costs of between 0.7 and 0.8 per cent per year, including a grace period. From 2011-2015, meanwhile, the average repayment period was between ten and 20 years and borrowing costs were at least 2 per cent per annum.

Under a new scheme starting in July 2017, Vietnam is now paying higher interest rates on loans with shorter repayment terms, with rates 2 to 3.5 per cent per annum higher on terms that could be halved.

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