Vietnam, donors seek ways to reverse loan disbursement drop

11:05 | 11/07/2019 Finance - Banking

(VEN) - The disbursement of official development assistance (ODA) and preferential loans provided by six donors - the World Bank (WB), the Asian Development Bank (ADB), the Japan International Cooperation Agency (JICA), the Export-Import Bank of Korea (KEXIM), the French Development Agency (AFD) and the KfW Development Bank - has slowed markedly in recent years.

vietnam donors seek ways to reverse loan disbursement drop

As of 2018, Vietnam had received more than US$80 billion in ODA and preferential loans, making it one of the largest recipients of this type of funding in the world. The six above-mentioned donors provided about 80 percent of the amount.

In 2018 alone, the six donors committed US$28.9 billion for Vietnam. However, the disbursement rate of ODA and loans in Vietnam dropped from a high 23.1 percent in 2014 to just 11.2 percent in 2018, lower than the average global rates recorded by the six donors. Of the committed capital for Vietnam in 2018, up to US$16.9 billion is yet to be disbursed.

The delay in disbursement was attributed to complicated and overlapping procedures, low readiness for projects, and cumbersome processes and requirements for disbursement. As a result, projects have been unable to meet schedules and targets, and costs have spiraled, affecting investment effectiveness and GDP growth.

In a bid to overcome this logjam in disbursement, the ODA National Steering Committee held a meeting with donors in Hanoi in mid-June, chaired by Deputy Prime Minister Pham Binh Minh. The participants agreed on the need to coordinate with the ODA National Steering Committee in building a mid-term public investment plan using ODA and concessional loans for the 2021-2025 period as one of the solutions.

Following the National Assembly’s approval of the revised Law on Public Investment, the government should direct the Ministry of Planning and Investment in collaboration with the Ministry of Finance and relevant ministries and agencies to revise the current decree in order to ensure consistency and clarity in terms of the role and responsibility of participating agencies, and simplify the approval process.

The Ministry of Planning and Investment should also work together with the Ministry of Finance and relevant agencies to review the implementation of the medium-term public investment plan outlined for 2020, and then take prompt actions to adjust and reallocate capital for projects under capital shortages. In addition, the completion of the legal framework for management and using of ODA and preferential loans is also necessary.

Tue Minh