Strengthening ODA capital management

(Baonghean.vn) - Public debt is a topic of public concern, and many ministries and sectors manage ODA loans. To effectively manage this capital source, there needs to be an appropriate financial management mechanism.

On the afternoon of October 25, at the Ministry of Finance's press conference, Mr. Hoang Hai, Deputy Director of the Debt Management Department (Ministry of Finance) said that on average, each year the state budget spends about 1 billion USD to pay foreign debt (including principal and interest). However, this figure is still lower than the budget's obligation to pay domestic loans. While the mobilized loan capital is only over 350 trillion VND, reaching 77.5% of the yearly plan, in the first 9 months of the year, the budget had to spend over 176.8 trillion VND to pay debt, of which domestic debt is over 140 trillion VND, and foreign debt is over 36.6 trillion VND.

The water plant in Nam Giang (Nam Dan - Nghe An) uses ODA capital from Finland. Photo: Hoang Vinh

Although all are within the limits of the Ministry of Finance's plan from the beginning of the year and approved by the Government, it is still something to consider because from July 2017, Vietnam will be removed from the list of preferential development loans by the World Bank because it has become a middle-income country, the pressure to repay foreign loans will be greater, new loans will also have less incentives, higher interest rates, shorter loan terms... Therefore, it is necessary to calculate and restructure debt, and at the same time, it is necessary to use loan capital effectively and balance it with the ability to repay debt - Mr. Hoang Hai said.

At the press conference, the representative of the Ministry of Finance answered questions from the press about the delay in disbursement causing increased costs, and the new Circular does not allow disbursement exceeding the estimate, which will cause more projects to be postponed, investors to be fined; how to manage ODA public debt, debt restructuring, and what sources will be used to repay debt in the coming time?

Currently, the debt of state-owned enterprises is 1.5 million billion VND, in the direction of self-borrowing and self-paying, but if state-owned enterprises cannot pay, will the State budget pay or not? Answering these questions, the representative of the Ministry of Finance said that, in order to use ODA capital effectively, it is necessary to gradually increase the shift from allocation to re-lending through credit institutions. Currently, the Ministry of Finance is submitting for approval to promulgate regulations on re-lending at the local level. Based on the economic and financial capacity of the locality according to regulations to determine the appropriate re-lending rate. Accordingly, localities bear most of the debt repayment costs, and are the main subjects to consider and calculate to determine whether the project is capable of repaying the debt?

Regarding the assessment of the effectiveness of ODA capital use, the Ministry of Finance said that the Government assigned this task to the Ministry of Planning and Investment, and the Ministry of Finance is responsible for tightening the management of guarantees, setting out requirements on borrowing and repayment obligations; and is also responsible for re-lending, and has now submitted to the Prime Minister a decision on re-lending through credit institutions. On the other hand, the Ministry of Finance is submitting amendments to the Law on Public Debt Management.

Red River