Prime Minister approves ODA usage orientation for the next 7 years

Prime Minister Nguyen Xuan Phuc has just approved the Orientation for attracting, managing and using ODA capital and preferential loans from foreign donors for the 2018-2020 period, with a vision for 2021-2025.

Do not use ODA for regular spending

Accordingly, for the 2018-2020 period, the Government directed to focus on handling difficulties, promoting disbursement and effective use of signed capital; continuing to select and prepare good public investment projects (based on socio-economic and financial efficiency), which will be disbursed after 2020 to ensure continuity and avoid sudden declines in development investment capital after 2020.

However, it is necessary to screen and select good and effective projects for sustainable socio-economic development, while ensuring that the budget deficit ceiling and public debt safety indicators approved by the National Assembly are not exceeded.

Focus on using loans in a number of key areas, key projects that are truly important, have widespread effects, have inter-regional connectivity, create momentum for regional and area development, and need to appraise and evaluate projects closely, objectively, and transparently to increase the effectiveness of using foreign loans.

Preferential loans are given priority to large-scale infrastructure projects that can generate revenue to repay debt; projects borrow for re-lending.

According to the Government's direction, foreign loans should only be used for sectors/projects that domestic public investment capital cannot meet, the private sector has no motivation to invest due to lack of profit, or some specific sectors need State investment to control and manage prices to facilitate the development of other economic sectors such as river ports, seaports, etc. Encourage the private sector to participate with the State in investing to solve infrastructure bottlenecks.

Research on applying mechanisms for enterprises to borrow capital from the WB, ADB and preferential loans from other donors without government guarantees to implement programs and projects in the fields of renewable energy and climate change response.

ODA loans and preferential loans are only used for development investment expenditures, not for regular expenditures.

Priority areas for ODA use

Principles for using non-refundable aid, with priority given to poverty reduction; social fields; building policies for institutional and human resource development; knowledge and technology transfer; prevention, mitigation of natural disaster risks and adaptation to climate change; preparation of infrastructure projects with complex techniques and technologies, investment projects in the form of public-private partnerships (PPP) or co-financing of projects using preferential loans to increase the preferential element of loans.

Illustration

ODA loans are given priority for programs and projects in the fields of health, education, vocational education, climate change adaptation, environmental protection, essential transport infrastructure that are not able to recover capital directly, are large-scale, have high spillover effects, are inter-regional, suitable for planning, and promote the socio-economic development of regions.

Preferential loans are given priority to large-scale infrastructure projects that can generate revenue to repay debt; projects borrow for re-lending.

For some important programs and projects that need priority and are unable to generate revenue to repay debts or are subject to other allocations, the Prime Minister shall consider and decide on the use of preferential loans for each specific case.

For the period 2021 - 2025, foreign loans will be used to focus on a number of key areas to ensure maximum economic efficiency according to scale. There needs to be a strict, objective and transparent appraisal and evaluation process through the development of a set of criteria for evaluating and selecting projects according to international standards, suitable for Vietnam's reality.

Priority is given to projects with socio-economic efficiency, directly promoting growth associated with sustainable development, especially projects with the ability to generate foreign currency revenue in the medium and long term to enhance the country's debt repayment capacity, for example: projects to solve basic bottlenecks in infrastructure (transportation, smart cities, clean energy and renewable energy, etc.), develop smart agriculture (irrigation, application of high technology in agricultural production, agricultural electrification, etc.), stimulate export industries or activities, innovation projects, technology transfer.

Prioritize projects that are public goods, part of the state budget expenditure tasks, and have spillover effects such as climate change adaptation, improving environmental quality, education, healthcare, technology, and skills.