Directive 18/CT-TTg official development assistance loans, foreign concessional loans instead of regular expenses

DIRECTIVE

On enhancing the management and increasing the efficiency of use of official development assistance loans and foreign concessional loans for development investment in the new situation instead of
regular expenses^[1]

Over the recent years, the mobilization, management and use of official development assistance (ODA) loans and foreign concessional loans have focused on investment in socio-economic projects and infrastructure facilities and made positive contributions to the national development, particularly in the development of traffic infrastructure, electricity generation, wastewater treatment, agriculture and rural development, climate change adaptation and construction of schools and hospitals at the central and grassroots levels. The implementation of programs and projects funded by ODA loans and foreign concessional loans has contributed to the improvement of policy institutions, application of modern technologies and human resources training. The policy mechanisms and regulations on the mobilization, management and use of ODA loans and foreign concessional loans have been further improved.

Beside recorded achievements, there remain a number of limitations and problems in the mobilization, management and use of ODA loans and foreign concessional loans, such as many negotiated and concluded projects have not yet been summed up by ministries and sectors for reporting to competent agencies for inclusion in medium-term public investment plans, thus affecting the implementation and capital disbursement progress as agreed with donors; the project preparation quality fails to meet the set requirements while slow project implementation leads to an increase in total investment and expenditures for ground clearance; the allocation of counterpart funds has not yet been performed in a sufficient and timely manner; a number of on-lending projects have met with difficulties in loan repayment and forced to be restructured or requiring the Government to advance capital from the Accumulation Fund for Loan Repayment; a number of programs and projects have not yet been allocated sufficient estimates while the disbursement progress remains slow, etc.

The above limitations and problems are attributable to objective and subjective causes, namely dependence of the mobilization and allocation of capital on policies and conditions of donors, each of whom is interested in investing in a number of specific sectors and fields, while the order and procedures for capital disbursement and withdrawal by donors remain slightly different; the planning work, investment plans, compilation of project documents and organization of implementation in a number of ministries, sectors and localities have not yet been well performed; project owners are entitled to allocations by the state budget and therefore fail to pay due attention to loan repayment or lack resolution in addressing difficulties and problems in the project implementation, thus prolonging the project implementation and requiring payment of interest rates and commitment charges; there are no explicit regulations on capital management and allocation mechanisms for umbrella programs and projects.

In order to soon address the above limitations and problems and further utilize foreign concessional loans for socio-economic development in the context that Vietnam has become a middle-income country, ODA loans are diminishing and the Government’s foreign loans are mostly concessional loans with interest rate close to that of the market, the enhancement of management and improvement of efficiency of use of ODA loans and foreign concessional loans in the new context are extremely necessary. In implementation of the Political Bureau’s Resolution No. 07-NQ/TW of November 18, 2016, on policies and solutions for restructuring the state budget and managing public debts to ensure a secure and sustainable national financial system, the 2017 Law on Public Debt Management, and the National Assembly Standing Committee’s Resolution No. 582/NQ-UBTVQH14 of October 5, 2018, on a number of tasks and solutions to further step up the implementation of policies and regulations on management and use of foreign loans, the Prime Minister directs ministries, sectors, localities, project owners and related organizations and individuals to implement the following guidelines and measures:

I. MAIN GUIDELINES AND POLICIES ON THE MOBILIZATION, MANAGEMENT AND USE OF ODA LOANS AND FOREIGN CONCESSIONAL LOANS FOR DEVELOPMENT INVESTMENT INSTEAD OF REGULAR EXPENSES

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