Hoang Hai, Deputy Director of the ministry’s Department of Debt Management and External Finance, told the media that Vietnam may no longer benefit from Official Development Assistance (ODA) loans from July 2017. It will be provided with only preferential loans and loans under market-based conditions.
The repayment period of existing ODA loans will be reduced by half or interest rates will be increased to 2%-3.5% a year.
After Vietnam became a lower-middle-income country in 2010, preferential loans from development partners have reduced considerably.
Before 2010, the average repayment period was about 30 years to 40 years with borrowing costs between 0.7% and 0.8% per year, including a grace period. From 2011-2015, the repayment period averaged 10 – 25 years with borrowing costs from 2%.
Hai said ODA loans have significantly contributed to socio-economic development. However, the public has raised concerns about the use of the loans.
ODA loans must be used more carefully, he added.
The Government has issued a directive on using foreign loans more effectively.
It states that public debt must be used for only development investment and building important socio-economic facilities. The Government will also increase re-payments of foreign loans from localities and cut down free provision of the funds.