Finance official claims proper use on ADB loans

Dec 8th at 14:29

08-12-2012 14:29:27+07:00

The US$300 million loan at preferential interest rates granted by the Asia Development Bank (ADB) will only be used to help the state-run enterprises restructure their debts, not to repay the debts for them, Dang Quyet Tien, deputy head of the Corporate Finance Agency under the Ministry of Finance has said.

The incentive bank loan is granted under a $630 million program offered by the ADB to restructure the Vietnam’s state-run groups and corporations.

Tien affirmed that the debt restructuring means that the state companies’ short-term loans at high interest rates will be replaced by long-term ones with reasonable interest rates.

“This will help the companies improve their cash flow and the abilities to pay debts,” he said.

“The government will not repay debts on behalf of the state-run enterprises as the debts still remain, but with different terms and interest rates.”

For instance, a five-year loan with a 15 percent a year interest rate will be changed into a 20-year term with a lower rate, he elaborated.

“In the long term, this will contribute to reduce bad debts and improve the liquidity of the national economy,” he said when asked if the incentives favor the state-run enterprises too much.

According to a report by the finance ministry, Vinashin currently has a VND80 trillion debt, while the respective figures for Vinalines and Song Da Group are VND40 trillion, and VND10 trillion (VND1 trillion = $48 million)

But Tien said not all state-run enterprises are qualified to apply for the preferential loans as there are some strict requirements.

“The borrowers are required to have adequate restructuring plans approved by competent agencies,” he said.

“The finance ministry will review their loan applications first before sending the list of borrowers for a consultant agency selected by the ADB.”

As the ADB grants the incentives as an investor, not a sponsor, they will strictly supervise the enterprises’ operations before opening their pocket, he added.