NA approves lifting foreign debt limit
NA approves lifting foreign debt limit
Delayed projects funded via official development assistance will receive a capital boost after the National Assembly agreed to swell Vietnam’s foreign debt cap by VND60 trillion ($2.6 billion) for medium-term public investments.
The National Assembly (NA) collected almost 90 per cent of votes last week to raise the cap on foreign debts designated for medium-term public investments for the period of 2016-2020 from the original VND300 trillion ($13.04 billion) to VND360 trillion ($15.65 billion). The NA will correspondingly reduce domestic loans to ensure the public debt cap of 65 per cent of the GDP that the government previously set. The additional foreign borrowing is aimed at meeting the disbursement requirements of projects funded by foreign donor government agencies, which are currently being delayed as a result of a lack of counterpart funding, cost overruns, slow site clearance, or poor capacity of project management or contractors.
Data by the Ministry of Planning and Investment (MPI) showed that the total disbursements of official development assistance (ODA) and concessional loans during the 2016-2020 period were expected to reach $26-30 billion, or roughly $5-6 billion per year. In fact, the total amount disbursed was merely $3.7 billion in 2016 and $3.6 billion in 2017.
According to MPI Minister Nguyen Chi Dung, ODA and concessional loans account for 13.5 per cent of Vietnam’s total capital for the medium-term public investment plan in the 2016-2020 period.
Meanwhile, data by the Ministry of Finance showed that foreign capital disbursement in the first nine months of this year was on record at VND16.369 trillion ($711.69 million), achieving some 27 per cent of the target set by the NA and over 29 per cent of the target assigned by the prime minister for the year.
The result was in fact poorer than in the same period of 2017 when the foreign capital was disbursed by 45.23 per cent of the target set by the NA and 46.67 per cent of the one assigned by the prime minister.
Minister Dung said that although the government has allocated relatively sufficient foreign capital for public investment projects in the four-year period, in reality, the disbursement plan thus far has revealed a number of issues. In particular, various ODA-funded projects newly signed or in the process of being signed have not been accounted for in the medium-term plan. The added funds, as the MPI suggested to the government, will thus ensure the project deployment commitment with the donors.
Cost overruns have emerged as a real issue in urban railway projects in both Hanoi and Ho Chi Minh City. For instance, the cost of the Nam Thang Long-Tran Hung Dao section of Hanoi’s Line 2 has risen from VND19.5 trillion ($847.42 million) to VND51.7 trillion ($2.24 billion), before being revised down to VND33.5 trillion ($1.45 billion) after reassessment.
The cost of the Cat Linh-Hadong section, likewise, swelled from VND8.7 trillion ($378.26 million) to VND47.3 trillion ($2.05 billion). Similarly in Ho Chi Minh City, the cost of the Ben Thanh-Suoi Tien section rose from VND17.3 trillion ($752.17 million) to VND47.3 trillion ($2.05 billion).
Meanwhile a number of projects, including the water drainage and wastewater treatment system of Thai Nguyen province, the water supply and sanitation project of Bac Kan province, and the general hospital project in Yen Bai province, have passed the period of capital disbursement as per the agreement with donors or are currently applying for disbursement extension.
In October, the Japan International Co-operation Agency (JICA) noted that there was undue delay in many ODA-funded projects in Vietnam, including one section of the Ho Chi Minh City metro line, two sections of the Hanoi metro line, and the maritime safety capability improvement project. The JICA stressed that the disbursement delay in ODA-funded projects, including those financed by the agency, has become more serious.
While the Japanese government has had high-level discussions with its Vietnamese counterpart about budget allocations this year and there has been “apparent improvement,” Vietnam still needs to allocate further funds for major projects that require capital such as those under the management of the Ministry of Transport.
In another statement last month, the JICA confirmed that Vietnam could continue receiving Japanese ODA loans for several decades to come, until the country gets out of the upper-middle income category. The agency is believed to have granted JPY39.5 billion ($350.7 million) in ODA funds to Vietnam in the first six months of this year.
