Localities to pay more for ODA finance

However, ODA will be reduced from 2017. Therefore, in order to balance budget spending and foster development in localities, the government intends to loan ODA and foreign loans at interest instead of being free.

According to the Ministry of Finance, Vietnam received over 45 billion USD in ODA and foreign preferential loans over the past 10 years, a third of which has been allocated to localities. Among this amount, only 8% were loans to invest in projects. The remainder was provided for free. It is expected that the government will now allocate ODA and foreign loans to localities at interest and for shorter terms.

Truong Hung Long, Director, Department of Debt Management and External Finance, Ministry of Finance said: Public debts have increased. So funding allocations need to be changed with loans in localities with good incomes repaying more. This can help reduce burden on the state budget and it also will improve access to loans for socio-economic development in localities.

Localities will need to carefully consider their repayment plans when taking these loans.The new policy should improve the effectiveness of investment, reduce local dependency on government support and prevent budget overspending.